We study effects of correlation ambiguity on portfolio choice when the number of risky assets is large. We find that the optimal portfolio contains only a fraction of available risky assets. With 100 stocks randomly selected from the S&P 500, less than 20 stocks will be held in the optimal...

We explicitly solve for the optimal dynamic strategy between a riskless asset and a risky asset with momentum. The optimal portfolio weight depends not only on momentum that characterizes the expected return as in Merton (1971) framework, but also on the historical price path, unlike in Merton....

While many studies document that the market risk premium is predictable and that betas are not constant, the dividend discount model ignores time-varying risk premiums and betas. We develop a model to consistently value cashflows with changing risk-free rates, predictable risk premiums and...