An investment is a commitment of funds made in the expectation of some positive rate of return. A fundamental principle of investments is diversification, where investors diversify their investments into different types of financial assets. The different stocks can be clubbed in one portfolio....

We develop and implement methods for determining whether introducing new securities or relaxing investment constraints improves the investment opportunity set for prospect investors. We formulate a new testing procedure for prospect spanning for two nested portfolio sets based on subsampling and...

Under adaptive learning, recursive algorithms are proposed to represent how agents update their beliefs over time. For applied purposes these algorithms require initial estimates of agents perceived law of motion. Obtaining appropriate initial estimates can become prohibitive within the usual...