Showing 1 - 10 of 88
Purpose of this paper: we study the asset allocation problem for a pension fund which maximizes the expected present value of its wealth augmented by the prospective mathematical reserve at the death time of a representative member. Design/methodology/approach: we apply the stochastic...
Persistent link: https://www.econbiz.de/10005858533
Considered here is on-line portfolio management aimed at maximizing the long-run growth of financial wealth. The portfolio is repeatedly rebalanced in response to observed returns on diverse assets. Suppose statistical information and related methods are not available - or deemed too diffcult....
Persistent link: https://www.econbiz.de/10005857758
The paper shows that financial market equilibria need not exist if agents possess cumulative prospect theory preferences with piecewise-power value functions. The reason is an infiniteshort-selling problem. But even when a short-sell constraint is added, non-existence can occur due to...
Persistent link: https://www.econbiz.de/10005857777
This paper investigates model risk issues in the context of mean-variance portfolio selection. We analytically and numerically show that, under model misspecification, the use of statistically robust estimates instead of the widely used classical sample mean and covariance is highly beneficial...
Persistent link: https://www.econbiz.de/10005858020
We conduct controlled experiments in order to analyze individual trading behavior. Our results suggest that investors measure their gains relative to their initial wealth, and that this reference point together with past stock price changes determine the portfolio choices. Subjects choose a...
Persistent link: https://www.econbiz.de/10005858051
Control problems with Recursive Multiple-Priors Utility (RMPU) are highly non-linear so that RMPU asset prices have been studied in very simple exchange economies only. We identify a continuous-time exchange equilibrium with Locally-Constrained-Entropy RMPU (LCE-RMPU) that is tractable even in...
Persistent link: https://www.econbiz.de/10005858066
The wealth dynamics of insurance companies strongly depends on the success of their investment strategies, but also on liquidity shocks which occur during unfavorable years, when indemnities to be paid to the clients exceed collected premia. An investment strategy that does not take liquidity...
Persistent link: https://www.econbiz.de/10005858142
This paper proposes a new wealth-dependent utility function for the inter-temporal consumption and portfolio problem, in which the subsistance (bliss) con-sumption level is a function of wealth. Ratchet effects obtain when higher wealth in-creases the subsistance consumption level; blas´...
Persistent link: https://www.econbiz.de/10005858307
This paper studies an application of a Darwinian theory of portfolioselection to stocks listed in the Dow Jones Industrial Average (DJIA).We analyze numerically the long-run outcome of the competition offix-mix portfolio rules in a stock market with actual DJIA dividends.In the model seemingly...
Persistent link: https://www.econbiz.de/10005858308
This paper complements theoretical studies on the Kelly rule in evolutionary finance by studying a Darwinian model of selection and reproduction in which the diversity of investment strategies is maintained through genetic programming. We find that investment strategies which optimize long-term...
Persistent link: https://www.econbiz.de/10005858334