We study the portfolio selection problem of an investor who can optimally exert costly effort for more income. The possibility of generating more income, if necessary, increases the risk-taking appetite of the investor. We find the optimal allocation to the risky security as a proportion of financial wealth and as a proportion of the total wealth, defined as the combination of the financial wea...

Abstract In order to solve problems in investor and venture fund managers remuneration paid mechanism, the paper presents the asymmetric information games existing in construction mechanism through information economics viewpoints. The paper building investor and venture fund managers remuneration paid mechanism based on principalagent theory, remuneration excitement and risk constraints. The r...

We examine how a firm’s incentive to commit fraud when going public varies with investor beliefs about industry business conditions. Fraud propensity increases with the level of investor beliefs about industry prospects but decreases in the presence of extremely high beliefs. Evidence suggests that two mechanisms are at work: monitoring by investors, and short-term executive compensation, both ...

This research attempts to propose a new measure of investor psychological bias with big data crawled from the web. The author constructs the investor bias measure with web search data and investigate the influences of this new measure on crude oil futures prices. Using 225,250 data points from Google, this paper computes the investor bias, and evaluates it with trading volumes. The author estab...

We develop a model to illustrate that controlling shareholders choose the level of investor protection that maximizes their own interests. Controlling shareholders in companies with complicated control structures can easily extract private benefits and are thus reluctant to enhance investor protection which would necessitate increased transparency. In contrast, controlling shareholders in compa...

In addition to their direct effects, episodes of financial instability may decrease investor confidence. Measuring the impact of a crisis on investor confidence is complicated by the fact that it is difficult to disentangle the effect of investor confidence from coincident direct effects of the crisis. In order to isolate the effects of financial crises on investor confidence, we study the inve...

We consider an investor in a financial market consisting of a riskless bond and several risky assets. The price processes of the risky assets are geometric Brownian motions where either the drifts are modelled as random variables assuming a constant volatility matrix or the volatility matrix is considered random and drifts are assumed to be constant. The investor is only able to observe the ass...

Duesenberry introduced the notion of a ratchet investor who does not tolerate any decline in her consumption rate. We connect the demand behavior of such an agent to the behavior of standard time–additive agents. A ratchet investor demands the running maximum of the optimal plan a conventional time–additive investor with lower initial wealth would choose. JEL subject classification. D91

Using the Chinese stock market data as sample, this paper investigates the impact of investor sentiment on the assets valuation. In order to classify stocks objectively, our sample stocks are sorted by double indicators (B/M and PE). In the portfolio, we find stocks with low B/M and high PE are sensitive to investor sentiment, which are considered to be costly to arbitrage. Investor sentiment h...

We consider the problem of a mutual fund manager that maximizes the present value of expected fees and has to decide the level of fee to impose on the fund. The fee will be paid by a risk averse investor that maximizes expected utility over final wealth. This investor can invest either in an indexed fund or in a managed fund. The manager has superior ability and, as a result of it, the fund off...