Portfolio inertia and epsilon-contaminations

Takao Asano

doi:10.1007/s11238-008-9101-7

Portfolio inertia and epsilon-contaminations

Takao Asano

Research output: Contribution to journal › Article › peer-review

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 language	English
Pages (from-to)	341-365
Number of pages	25
Journal	Theory and Decision
Volume	68
Issue number	3
DOIs	https://doi.org/10.1007/s11238-008-9101-7
Publication status	Published - Mar 2010
Externally published	Yes

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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10.1007/s11238-008-9101-7

Cite this

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title = "Portfolio inertia and epsilon-contaminations",

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.",

keywords = "E-contaminations, Knightian uncertainty, Portfolio inertia, Portfolio selection problem",

author = "Takao Asano",

note = "Funding Information: I would like to thank Hiroyuki Ozaki for his advice and encouragement. I am also grateful to Akihiko Matsui, Kazuhiko Ohashi and Takashi Ui for their comments and discussions on this work. I appreciate Nobuo Koida and Satoru Takahashi as well as participants at Macroeconomics Workshop (Osaka University), the 2004 Annual Meeting of the Japanese Economic Association in Okayama, Economic Theory Workshop at Tohoku University, and the 2005 Annual Meeting of the Nippon Finance Association in Yokohama for their comments on this work. Needless to say, I am responsible for any remaining errors. I greatly acknowledge financial support from the Twenty first century COE program (Osaka University), Nomura Foundation for Social Science, the Japan Securities Scholarship Foundation,and the Zengin Foundation for Studies on Economics and Finance.",

year = "2010",

month = mar,

doi = "10.1007/s11238-008-9101-7",

language = "English",

volume = "68",

pages = "341--365",

journal = "Theory and Decision",

issn = "0040-5833",

publisher = "Springer Netherlands",

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TY - JOUR

T1 - Portfolio inertia and epsilon-contaminations

AU - Asano, Takao

N1 - Funding Information: I would like to thank Hiroyuki Ozaki for his advice and encouragement. I am also grateful to Akihiko Matsui, Kazuhiko Ohashi and Takashi Ui for their comments and discussions on this work. I appreciate Nobuo Koida and Satoru Takahashi as well as participants at Macroeconomics Workshop (Osaka University), the 2004 Annual Meeting of the Japanese Economic Association in Okayama, Economic Theory Workshop at Tohoku University, and the 2005 Annual Meeting of the Nippon Finance Association in Yokohama for their comments on this work. Needless to say, I am responsible for any remaining errors. I greatly acknowledge financial support from the Twenty first century COE program (Osaka University), Nomura Foundation for Social Science, the Japan Securities Scholarship Foundation,and the Zengin Foundation for Studies on Economics and Finance.

PY - 2010/3

Y1 - 2010/3

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

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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 -

Portfolio inertia and epsilon-contaminations

Abstract

Keywords

ASJC Scopus subject areas

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