Households systematically overvalue or undervalue their houses. We compute house value misperception as the difference between self-reported and market house values. Misperception is sizable, countercyclical, and persistent. We find that a 1 percent increase in house overvaluation results, on...

This paper studies the identification of the costs of simultaneous search in portfolio problems (Chade and Smith, 2006). We show that market shares data from a single market do not provide sufficient information to identify the search cost distribution in any interval, even if...

We generalize the classic Grossman and Laroque (1990) (GL) model of optimal portfolio choice with housing and transaction costs by introducing predictability in house prices. As in the GL model, agents only move to more expensive (cheaper) houses when their wealth-to-housing ratios reach an...

We investigate the effect of the regime-switching transaction costs and dividends on liquidity premium and investor's optimal strategy. With reasonably calibrated parameters, we show that counter-cyclical transaction costs substantially raise liquidity premium while pro-cyclical dividends...

Should an investor unwind his portfolio in the face of changing economic conditions? We study an investor's optimal trading strategy with finite horizon and transaction costs in an economy that switches stochastically between two market conditions. We fully characterize the investor's time...

Mutual fund families are increasingly assigning traders to manage corporate bond mutual funds. Using this setting to study the role of traders in investment management, we document that trader managers identify and exploit short-term trading opportunities at lower transaction costs. These skills...

We present comprehensive evidence in support of giving liquidity equal standing to size, value/growth, and momentum as investment styles, as defined by Sharpe (1992). First, we show that financial market liquidity, as identified by stock turnover, is an economically significant indicator of...

We present a new profitable trading and risk management strategy with transaction cost for an adaptive equally weighted portfolio. Moreover, we implement a rule-based expert system for the daily financial decision making process by using the power of spectral analysis. We use several key...