in a world market where there are tens of thousands of stocks and hundreds of thousands of corporate bonds and other fixed-income securities, it is next to impossible for individual investors who have other things to do to figure out what to buy and what to sell. instead, we buy accounts and funds managed by investment professionals. how do professional investment managers form portfolios of se...

If individuals derive a small utility from gambling, we should observe high turnover in portfolios that are of only marginal importance to them. By the use of detailed individual financial data, as well as trades from a Swedish online broker, I measure the frequency and cost of online trading in the cross-section, and find the opposite relation. Those who have online portfolios that constitute ...

Objective: The main objective of this research is to explain the accrual anomaly using accruals factor (CMA) and accrual-based factor-mimicking portfolios as well as checking whether accrual anomaly is risk-based or mispricing. According to rational frictionless asset pricing model, the ability of accruals to predict returns should come from the loadings on this accrual factor loading that pred...

This paper examines portfolios within the framework of a dynamic asset-pricing model when investors can trade equity assets as well as bonds of many different maturities. We specify the model so that investors have demand for both a risky and a safe income stream. We characterize the resulting optimal equilibrium stock and bond portfolios and document that optimal bond investment strategies par...

The paper compares three portfolio optimization models. Modern portfolio theory (MPT) is a short-horizon volatility model. The relevant time horizon is the sampling interval. MPT is myopic and implies that investors are not concerned with long-term variance or mean-reversion. Intertemporal portfolio choice is a multiple period model that revises portfolios continuously in response to relevant s...

This paper examines the conditions under which investors flee from stocks to bonds or vice versa. Daily and weekly stock and bond returns are analyzed to determine when investors start to flee from a market and rebalance their portfolios. We use a theoretical model that demonstrates why rational investors deviate from the optimal portfolio weights and under which conditions they rebalance their...

Although the understanding of and motivation behind individual trading behavior is an important puzzle in finance, little is known about the connection between an investor's portfolio structure and her trading behavior in practice. In this paper, we investigate the relation between what stocks investors hold, and what stocks they buy, and show that investors with similar portfolio structures to...