Do ETFs, one of the most popular investment products in recent times, benefit individual investors? Using data from one of the largest brokerages in Germany, we find that individual investors do not improve their portfolio performance, even before transactions costs, by using these passive products. Using counterfactual analysis, we show that this occurs mostly from buying ETFs at “wrong” point...

As the dependence structure (i.e. the copula) among the assets is ...xed, one might think that the riskier the assets, the riskier the portfolio. Surprisingly enough, this conjecture turns out to be false even for coherent risk measures and normal returns. We show that two conditions are able to preserve risk ordering under the portfolio: convexity for the risk measure and conditional increasin...

This paper studies a discrete-time financial model with or without transaction costs, in which only partial information can be observed. Partial information model means that the investors in the market can observe no more information except the stock prices. This model has been investigated in Karatzas and Xue (1991), Lakner (1995, 1998), and Cheng (2004), etc. Applying stochastic filtering the...

We analyze the problem of real optimal asset allocation for a pension fund maximising the expected CRRA utility of its real disposable wealth. The financial horizon of the analysis coincides with the random death time of a representative subscriber. We consider a very general setting where there exists a stochastic investment opportunity set together with stochastic contributions and pensions a...

Most existing portfolio choice models ignore the prevalent periodic market closure and the fact that market volatility is significantly higher during trading periods. We find that market closure and the volatility difference across trading and nontrading periods significantly change optimal trading strategies. In addition, we numerically demonstrate that transaction costs can have a first order...

Monte Carlo simulations are used to demonstrate that a very attractive tax-based trading strategy is to realize all capital losses, using excess losses to offset realized gains to rebalance the portfolio. This strategy increases the mean and median return by taking advantage of the tax-deductibility of losses, and mitigates risk by allowing low-cost portfolio rebalancing. This portfolio rebalan...

In a market with one safe and one risky asset, an investor with a long horizon, constant investment opportunities, and constant relative risk aversion trades with small proportional transaction costs. We derive explicit formulas for the optimal investment policy, its implied welfare, liquidity premium, and trading volume. At the first order, the liquidity premium equals the spread, times share ...

Though risk aversion and the elasticity of intertemporal substitution have been the subjects of careful scrutiny, the long-run risks literature as well as the broader literature using recursive utility to address asset pricing puzzles has ignored the full implications of their parameter specifications. Recursive utility implies that the temporal resolution of risk matters and a quantitative ass...

The complexation behaviour of Cu(II) with di- and tripeptides containing the aromatic amino acids phenylalanine or typtophan has been investigated at different pH-values and compared with results obtained with di- and triglycine. The results obtained by means of ESR and optical absorption spectroscopy show an influence of the two different aromatic entities on the magnetic and optical parameter...

This paper shows that, in markets with transaction costs, even if a redundant security does not even save individual investors’ total costs for their security trading, the prices of the other securities may well be different were it to not be available for trade, resulting in a different equilibrium consumption allocation. In this sense, a redundant security may give rise to the divergence of i...