We show that the optimal asset allocation for an investor depends crucially on the theory with which the investor is modeled. For the same market data and the same client data different theories lead to different portfolios. The market data we consider is standard asset allocation data. The client data is determined by a standard risk profiling question and the theories we apply are mean–varian...

Do women and men behave differently in financial asset markets? Our results from an asset market experiment show a marked gender difference in producing speculative price bubbles. Mixed markets show intermediate values, and a meta-analysis of 35 markets from different studies confirms the inverse relationship between the magnitude of price bubbles and the frequency of female traders in the mark...

For many, derivatives are often associated with infamous financial events and scandals resulting from highly leveraged and speculative use of derivative financial instruments. The most common use of these instruments is, however, in the often quiet area of risk management rather than the charged atmosphere of high stakes betting. At the most basic level, a derivative is simply a financial instr...

As illustrated by liquidity support, equity injections and asset repurchases in financial crises and by IMF credit lines to countries, authorities often intervene in order to revivemarkets that have dried up or to create new ones. In such situations, agents participate only if they receive from the governmental scheme more than in the marketplace, while the market outcome depends on who joins t...

This study explains how stochastic beta models and their parametrizations based on Bayesian inference work using Korean stock market data. In this study, Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model, is newly adopted to the original stochastic beta model. The ability of estimating parameters between original stochastic beta model and stochastic beta model based on GAR...

In common finance literature, Black-Scholes partial differential equation of option pricing is usually derived with no-arbitrage principle. Considering an asset market, Merton applied the Hamilton-Jacobi-Bellman techniques of his continuous-time consumption-portfolio problem, deriving general equilibrium relationships among the securities in the asset market. In special case where the interest ...

We address the empirical implementation of the static asset allocation problem by developing a forward-looking approach that uses information from market option prices. To this end, constant maturity S&P 500 implied distributions are extracted and subsequently transformed to the corresponding risk-adjusted ones. Then, we form optimal portfolios consisting of a risky and a risk-free asset and ev...

In investment market, investors often pay attention to investment portfolio selection and asset allocation under market risk. Thus, this study presents a two-stage method of investment portfolio based on soft computing techniques. The first stage uses data envelopment analysis to select most profitable funds, while hybrid of genetic algorithm (GA) and particle swarm optimization (PSO)is propose...

Beta, as measured by the Capital Asset Pricing Model (CAPM), is widely used for pricing stocks, determining the cost of capital, and gauging the extent to which markets are integrated. The CAPM model assumes that equilibrium conditions prevail. The choice of which market portfolio to use in the regression – the home country or global index – depends on the level of global market integration. We...

The housing market plays a significant role in the economies of countries, and as an asset price channel, is considered as one of the main channels for monetary transmission mechanism. Considering the structure of the country's economy and the characteristics of housing as a capital commodity, the assessment of the impact of housing investment on inflation is important. This research evaluates ...