A portfolio choice model is provided to illustrate the disposition effect under irrational belief in mean reversion assumption. Higher cognitive reference, stronger irrational belief in mean reversion magnitude and less risk aversion all strengthen the disposition effect in the model. The...

In contrast to the constant exercise boundary assumed by Broadie and Detemple (1996) [Broadie, M., Detemple, J., 1996. American option valuation: New bounds, approximations, and comparison of existing methods. Review of Financial Studies 9, 1211-1250], we use an exponential function to...

This paper analyzes the relationship between net capital flow and home bias puzzle. The model suggests that both capital inflow and potential preference in home assets lead agents to allocate more in domestic and thus s home bias phenomenon. Besides, the more nontradable consumption, the fewer...