The surge in international asset trade since the early 1990s has lead to renewed interest in models with international portfolio choice, an aspect that was largely cast aside when the ad-hoc portfolio balance models of the 1970s were replaced bymodels of optimizing agents. We develop the...

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....

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...

This paper investigates the impact of heterogeneous beliefs of professional investors on the currency options market. Using a unique data set with detailed information on the foreign-exchange forecasts of about 50 market participants over more than ten years, we construct an empirical proxy for...

No, not really. Responding to lingering concerns about the reliability of SVARs, Christiano et al (NBER Macro Annual, 2006, “CEV”) propose to combine OLS estimates of a VAR with a spectral estimate of long-run variance. In principle, thiscould help alleviate specification problems of SVARs in...

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...