Portfolio inertia and epsilon-contaminations

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This article analyzes investors' portfolio selection problems in a two-period dynamic model of Knightian uncertainty. We account for the existence of portfolio inertia in this two-period framework. Furthermore, by incorporating investors' updating behavior, we analyze how observing new information in the first period will affect investors' behavior. By this analysis, we show that observing new information in the first period will expand portfolio inertia in the second period compared with the case in which observing new information has not been gained in the first period if the degree of Knightian uncertainty is sufficiently large.

Original languageEnglish
Pages (from-to)341-365
Number of pages25
JournalTheory and Decision
Volume68
Issue number3
DOIs
Publication statusPublished - 2010
Externally publishedYes

Fingerprint

environmental pollution
investor
Uncertainty
Contamination
uncertainty
portfolio selection
Dynamic models
Investors
Inertia
New Information
ε-contamination
Knightian uncertainty

Keywords

  • E-contaminations
  • Knightian uncertainty
  • Portfolio inertia
  • Portfolio selection problem

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Economics, Econometrics and Finance(all)
  • Computer Science Applications
  • Applied Psychology
  • Social Sciences(all)
  • Arts and Humanities (miscellaneous)
  • Developmental and Educational Psychology

Cite this

Portfolio inertia and epsilon-contaminations. / Asano, Takao.

In: Theory and Decision, Vol. 68, No. 3, 2010, p. 341-365.

Research output: Contribution to journalArticle

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