We study the question what value an agent in a generalized Black-Scholes model with partial information attributes to the complementary information. To do this, we study the utility maximization problems from terminal wealth for the two cases partial information and full information. We assume that the drift term of the risky asset is a dynamic process of general linear type and that the two le...

In contrast to previous studies, we redefine the category of "rationality" from the perspective of investors’ pursuit for wealth maximization. Using the data from Chinese stock market, this paper studies the impact of rational and irrational sentiment on asset returns from short-term to long-run. We find that irrational sentiment has stable positive predictability on the future returns in short...

In this chapter we provide a methodology to solve dynamic portfolio strategies considering realistic assumptions regarding the return distribution. First, we analyze the empirical behavior of some equities, suggesting how to approximate an historical return series with a factor model that accounts for most of the variability and proposing a methodology to generate realistic return scenarios. Th...

We construct a model for liquidity risk and price impacts in a limit order book setting, and derive a wealth equation and a characterization of illiquidity costs for liquidity providers. The model has desirable stylized facts justified by empirical studies and contains all three components identified by Kyle (1985). We give conditions under which the model is arbitrage free. By considering the ...

Academics and practitioners usually optimize portfolios on the basis of mean and variance. They set the goal of maximizing risk-adjusted returns measured by the Sharpe ratio and thus determine their optimal exposures to the assets considered. However, there is an alternative criterion that has an equally plausible underlying idea; geometric mean maximization aims to maximize the growth of the c...

A continuous-time financial portfolio selection model with expected utility maximization typically boils down to solving a (static) convex stochastic optimization problem in terms of the terminal wealth, with a budget constraint. In literature the latter is solved by assuming a priori that the problem is well-posed (i.e., the supremum value is finite) and a Lagrange multiplier exists (and as a ...

We consider a general discrete-time financial market with proportional transaction costs as in [Kabanov, Stricker and Rásonyi Finance and Stochastics 7 (2003) 403–411] and [Schachermayer Math. Finance 14 (2004) 19–48]. In addition to the usual investment in financial assets, we assume that the agents can invest part of their wealth in industrial projects that yield a nonlinear random return. We...

The purpose of this study is to enhance the understanding in debate governance demographics by investigate impact board diversity on dividend policy and moderating effect corporate investment efficiency policy. sample incorporated comprises panel data 77 firms listed Karachi stock exchange (KSE) during period 2012-2019. This performs a parametric technique regression analysis measure Panel leas...

We consider a power utility maximization problem with additive habits in a framework of discrete-time markets and random endowments. For certain classes of incomplete markets, we establish estimates for the optimal consumption stream in terms of the aggregate state price density, investigate the asymptotic behavior of the propensity to consume (ratio of the consumption to the wealth), as the in...

This paper develops a theoretical model of optimal schooling levels where ability and family background are the central explanatory variables. We derive schooling demand and supply functions based on individual wealth maximization. Using the National Longitudinal Survey of Youth 1979 data, we stratify our sample into 1-yr full-time equivalent (FTE) work experience cohorts for 1985–1989. The est...