We provide a representation for the nonmyopic optimal portfolio of an agentconsuming only at the terminal horizon when the single state variable follows ageneral diusion process and the market consists of one risky asset and a risk-freeasset. The key term of our representation is a new object...

Applied researchers often test for the difference of the variance of two investment strategies;in particular, when the investment strategies under consideration aim to implementthe global minimum variance portfolio. A popular tool to this end is the F-test for theequality of variances....

Many statistical applications require an estimate of a covariance matrix and/or its inverse.When the matrix dimension is large compared to the sample size, which happensfrequently, the sample covariance matrix is known to perform poorly and may suffer fromill-conditioning. There already exists...

It is well known that mean-variance portfolio selection is a time-inconsistent optimalcontrol problem in the sense that it does not satisfy Bellman’s optimalityprinciple and therefore the usual dynamic programming approach fails. We developa time-consistent formulation of this problem, which...

This is the first study to show evidence of liquidity risk in private equity returns.Our data contains cash flows for 4,403 liquidated investments, which are both successfuland unsuccessful, reducing sample selection bias to a minimum. We find that a onestandarddeviation positive shock in...

To shed light on the empirical relevance of the limits to arbitrage, we study hedge funds’ trading patterns in the stock market during liquidity crises. Consistent with arbitrageurs’ limited ability to provide liquidity, we find that at the time of liquidity crises hedge funds reduce their...

We calculate equilibria of dynamic double-auction markets in which agents aredistinguished by their preferences and information. Over time, agents are privatelyinformed by bids and offers. Investors are segmented into groups that differ withrespect to characteristics determining information...

We study the existence of dynamic equilibria with endogenously complete markets incontinuous-time, heterogenous agents economies driven by diusion processes. Ourmain results show that under appropriate conditions on the transition density ofthe state variables, market completeness can be deduced...

The …xed rate tender is one of the main operational formats usedby central banks in the implementation of their monetary policies. Whileacademic research has largely dismissed the procedure for its tendency to en-courage overbidding, central banks such as the ECB and the Bank of Englandhave...

We provide a new method to derive the state price density per unit probabilitybased on option prices and GARCH model. We derive the risk neutraldistribution using the result in Breeden and Litzenberger (1978) and thehistorical density adapting the GARCH model of Barone-Adesi, Engle, andMancini...