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 - Mar 2010
Externally publishedYes

Keywords

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

ASJC Scopus subject areas

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

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