This paper analyzes investors’ portfolio selection problems in a two-period dynamic model of Knightian uncertainty. We account for the existence of portfolio inertia in this two-period framework. Furthermore, by incorporating investors’ up-dating behavior, we analyze how new observation in...

We consider individual’s portfolio selection problems. Introducing the concept of ambiguity, we show the existence of portfolio inertia under the assumptions that decision maker’s beliefs are captured by an inner measure, and that her preferences are represented by the Choquet integral with...

We conduct a replication experiment, with sophisticated student participants, of the three main treatments of the debt aversion experiment by Martínez-Marquina and Shi (2024). While participants in our experiment have chosen return maximizing strategies much more frequently than those in...

This study examines how experiencing a pandemic affects household investment behaviors. By leveraging cross-state variations in the H1N1 mortality rate in 2009, our difference-in-differences analysis reveals interesting findings. Although the pandemic does not significantly affect stock market...

This study experimentally investigates the impact of the lack of arbitrage opportunities across different assets on the realization of the law of one price. Our experiment is based on the framework established by Charness and Neugebauer (2019) where participants, acting as traders, are involved...

This paper develops a model of banking to study the risk-taking consequences of contingent capital (CC). It begins with the observation that partial conversion of CC provides its owners with a portfolio of equity and debt. Since the former (latter) asset typically induces a preference for risk...

This paper proposes a novel test of zero pricing errors for the linear factor pricing model when the number of securities, N, can be large relative to the time dimension, T, of the return series. The test is based on Student t tests of individual securities and has a number of advantages over...

Taxes on capital gains are deferred until realization, whereas dividend taxes are levied upon accrual. This often makes dividends tax-disadvantaged relative to share repurchases, which leads to the payout puzzle: why do firms pay dividends? This paper develops a model of corporate payout policy...

The Global Financial Crisis (GFC) changes the relative economic riskiness and risk-adjusted-performance of different asset markets. While the empirical distribution for stock return shifted to the right and became more concentrated around the mean after the GFC, the real estate market...