We evaluate how non-normality of asset returns and the temporal evolution of volatility and higher moments affects the conditional allocation of wealth. We show that if one neglects these aspects, as would be the case in a mean-variance allocation, a sighifiant cost would arise. The performance...

We extend Duffie, Garleanu, and Pedersen's (2005) search-theoretic model of over-the-counter asset markets, allowing for a decentralized inter-dealer market with arbitrary heterogeneity in dealers' valuations or inventory costs. We develop a solution technique that makes the model fully...