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 language | English |
|---|---|
| Pages (from-to) | 341-365 |
| Number of pages | 25 |
| Journal | Theory and Decision |
| Volume | 68 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 2010 |
| Externally published | Yes |
Fingerprint
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 journal › Article
}
TY - JOUR
T1 - Portfolio inertia and epsilon-contaminations
AU - Asano, Takao
PY - 2010
Y1 - 2010
N2 - 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.
AB - 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.
KW - E-contaminations
KW - Knightian uncertainty
KW - Portfolio inertia
KW - Portfolio selection problem
UR - http://www.scopus.com/inward/record.url?scp=79551590302&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=79551590302&partnerID=8YFLogxK
U2 - 10.1007/s11238-008-9101-7
DO - 10.1007/s11238-008-9101-7
M3 - Article
AN - SCOPUS:79551590302
VL - 68
SP - 341
EP - 365
JO - Theory and Decision
JF - Theory and Decision
SN - 0040-5833
IS - 3
ER -