We develop a model of portfolio choice to nest the views of Keynes, who advocates concentration in a few familiar assets, and Markowitz, who advocates diversification. We use the concepts of ambiguity and ambiguity aversion to formalize the idea of an investor's "familiarity" toward assets. The...

Computing the optimal portfolio policy of an investor facing capital gains tax is a challenging problem: because the tax to be paid depends on the price at which the security was purchased (the tax basis), the optimal policy is path dependent and the size of the problem grows exponentially with...

We provide a general framework for finding portfolios that perform well out-of-sample in the presence of estimation error. This framework relies on solving the traditional minimum-variance problem but subject to the additional constraint that the norm of the portfolio-weight vector be smaller...