A great proportion of stock dynamics can be explained using publicly available information. The relationship between dynamics and public information may be of nonlinear character. In this paper we offer an approach to stock picking by employing so-called decision trees and applying them to XETRA...

This paper examines the two-fund separation paradigm in the context of an infinite-horizon general equilibrium model with dynamically complete markets and heterogeneous consumers with time- and state-separable utility functions. With the exception of the dynamic structure, we maintain the...

This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...

Private investors have limited time available for learning about stocks as they need to divide their time between stock analysis and work. This paper analyzes the influence of learning constraintsin the form of time constraints on portfolio selection and derives both optimal portfolio holdings...

We derive representations for the stock price drift and volatility in the equilibrium of agents with arbitrary, heterogeneous utility functions and with the aggregate dividend following an arbitrary Markov diffusion. We introduce a new, intrinsic characteristic of the aggregate dividend process...

This paper presents an equilibrium model in a pure exchange economy when investors have three possible sources of heterogeneity. Investors may differ in their beliefs, in their level of risk aversion and in their time preference rate. We study the impact of investors heterogeneity on the...