As the dynamic mean-variance portfolio selection formulation does not satisfy the principle of optimality of dynamic programming, phenomena of time inconsistency occur, i.e., investors may have incentives to deviate from the pre-committed optimal mean-variance portfolio policy during the...

In this paper, a link between a time-consistent and a pre-commitment investment strategy is established. We define an implied investment target, which is implicitly contained in a time-consistent strategy at a given time step and wealth level. By imposing the implied investment target at the...

A great proportion of stock dynamics can be explained using publicly available information. The relationship between dynamics and public information may be of nonlinear character. In this paper we offer an approach to stock picking by employing so-called decision trees and applying them to XETRA...

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...

In the experimental scenario several agents repeatedly invest in n (n2) state-specific assets. The evolutionarily stable and equilibrium (Blume and Easley, 1992) portfolio for this situation requires to distribute funds according to the constant probabilities of the various states. The different...

One of Keynes' core issues in his liquidity preference theory is how fundamental uncertainty affects the propensity to hold money as a liquid asset. The paper critically assesses various formal representations of fundamental uncertainty and provides an argument for a more boundedly rational...

With regard to retirement savings individual investors tend to hold large positions of their wealth in riskless assets, although equity products offer higher returns. In this article we study a behavioral portfolio model which captures this phenomenon by considering two behavioral aspects: fear...

One of Keynes’ core issues in his liquidity preference theory is how fundamental uncertainty affects the propensity to hold money as a liquid asset. The paper critically assesses various formal representations of fundamental uncertainty and provides an argument for a more bounded rational...

This paper sheds new light on herding of institutional investors by using a unique database that identifies every transaction made by financial institutions in the German stock market. First, the analysis reveals that herding behavior of institutions occurs daily. Second, replication of the...