Choosing the optimal holding period is an important part of real estate investment decisions, because “when to sell” affects “whether to buy.” This paper presents a theoretical model for such decision making. Our model indicates that the optimal holding period is affected by both...

We examine the impact of trading costs on pairs trading profitability in the US equity market over the period 1963-2009. After controlling for commissions, market impact and short selling fees; we find that pairs trading remains profitable, albeit at much more modest levels. Specifically, we...

We consider the problem of tracking the optimal allocation between a risky and a risk-free asset when the expected return is stochastic and trading incurs transaction costs. The rebalancing policy optimises the tradeoff between the opportunity cost of holding a suboptimal portfolio and the...

Various results in economical and financial literature are built without taking into consideration market frictions. For instance, many of the well-known results on asset return structures and distributions do not involve the transaction costs. However any investor is aware that the indexes or...

The transaction costs applied by various european online brokers are now given by piecewise affine functions. So it is interesting to analyze the behaviour of any portfolio in this market context. Our purpose in this work is to determine the expected value and variance of a portfolio return...

Let us consider a portfolio made by a risky asset and cash. Any (individual) investor in such a portfolio is faced with two problems. She may ask about the possible returns whenever the asset relative change is expected to vary inside a given interval. Conversely, she might lead to determine the...

We derive a closed-form optimal dynamic portfolio policy when trading is costly and security returns are predictable by signals with different mean-reversion speeds. The optimal strategy is characterized by two principles: 1) aim in front of the target and 2) trade partially towards the current...