Observed international diversification implies an investment home bias (IHB). Can bivariate preferences with a local domestic peer group rationalize the IHB? For example, it is argued that wishing to have a large correlation with the Standard and Poor's 500 stock index (S&P 500 stock index) may...

Observed international diversification implies an investment home bias (IHB). Can bivariate preferences with a local domestic peer group rationalize the IHB? For example, it is argued that wishing to have a large correlation with the S&P 500 stock index may induce an increase in the domestic...

This paper explores how the scarcity of cognitive resources affects portfolio decisions. I consider an economy where investors allocate mental effort to learn about the mean return of a number of assets, by retrieving information from a stock of memories. As a result, parameter uncertainty...

We investigate the degree to which cryptocurrencies provide diversification benefits to an investor. We use a stochastic spanning methodology to construct optimal portfolios with and without cryptocurrencies, evaluating their comparative performance both in- and out-of-sample. Empirical analysis...

We experimentally investigate whether the satisficing approach is absorbable, i.e., whether it still applies after participants become aware of it. In a setting where an investor decides between a riskless bond and either one or two risky assets, we familiarize participants with the satisficing...

We study portfolio selection under Conditional Value-at-Risk and, as its natural extension, spectral risk measures, and compare it with traditional mean–variance analysis. Unlike the previous literature that considers an investor’s mean-spectral risk preferences for the choice of optimal...

This paper discusses a multi-objective portfolio optimization problem for practical portfolio selection in fuzzy environment, in which the return rates and the turnover rates are characterized by fuzzy variables. Based on the possibility theory, fuzzy return and liquidity are quantified by...

Das et al. (2010) develop a model where an investor divides his or her wealth among mental accounts with motives such as retirement and bequest. Nevertheless, the investor ends up selecting portfolios within mental accounts and an aggregate portfolio that lie on the mean–variance frontier....

This paper analyzes the single period portfolio selection problem on the location-scale return family. The skew normal distribution, after recentering and reparameterization, is shown to be in this family. The recentered and reparameterized distribution, called factor-recentered skew normal, can...

This experimental study investigates whether individuals prefer bounded rationality over rational choice theory when facing simple investment tasks. First, participants state some personal parameters that serve as an input to render a theoretical approach, namely satisficing or optimality,...