We study the optimal investment problem for a continuous time incomplete market model such that the risk-free rate, the appreciation rates and the volatility of the stocks are all random; they are assumed to be independent from the driving Brownian motion, and they are supposed to be currently...

For the problem of continuous time optimal portfolio selection, we found that the optimal strategies for investors with different performance criterions can be constructed using a limited number of fixed processes (mutual funds), for a incomplete market with a larger number of available risky...

We theoretically show that there is a fundamental disconnect between the disposition effect, i.e., investors’ tendency to sell winning assets too early and losing assets too late, and its common empirical measure, namely a positive difference between the proportion of gains and losses...

Partisan bias in fund portfolios is the effect of fund manager's political affiliation on portfolio allocation decisions. I study two potential channels of this bias: biased expectations where managers become optimistic (pessimistic) when their party comes in (goes out of) the government, and...

Using the mutual fund industry as a laboratory, we demonstrate theoretically and empirically that economic policy uncertainty an affect investment decisions through an information rather than real options channel. Specifically, we find that fund flow-performance sensitivity decreases in...

Individual investors select high-fee index mutual funds despite the fact that the future payouts are nearly identical. We offer an explanation for this violation of the Law of One Price based on investor desire to diversify. While diversification in some settings may be beneficial, in the case...

Using proprietary data from a major fund data provider, we analyze the screening activity of investment consultants (ICs) who advise institutional investors with trillions of dollars in assets. We find that ICs frequently shortlist funds using threshold screens clustered at round, base 5 or base...

Our experiments evaluate the role of information presentation in reducing violations of the Law of One Price in individual investor selection of index mutual funds. The results indicate that most individuals fail to minimize fees. However, individuals allocate nearly 27% (43%) more of their...

The two fund separation property of the elliptical distributions is extended to the skew-elliptical and by adding a number of funds equalling the rank of the skewness matrix. Some elements of the generalization to singular extended skew-elliptical distributions are covered. -- Portfolio...