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Asset Pricing And Optimal Portfolio Choice In The Presence Of Illiquid Durable Consumption Goods
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Book Synopsis Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods by : Sanford J. Grossman
Download or read book Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods written by Sanford J. Grossman and published by . This book was released on 1987 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze a model of optimal consumption and portfolio selection in which consumption services are generated by holding a durable good. The durable good is illiquid in that a transaction cost must be paid when the good is sold. It is shown that optimal consumption is not a smooth function of wealth; it is optimal for the consumer to wait until a large change in wealth occurs before adjusting his consumption. As a consequence, the consumption based capital asset pricing model fails to hold. Nevertheless, it is shown that the standard, one factor, market portfolio based capital asset pricing model does hold in this environment. It is shown that the optimal durable level is characterized by three numbers (not random variables), say x, y, and z (where x
Book Synopsis Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods by : Sanford J. Grossman
Download or read book Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods written by Sanford J. Grossman and published by . This book was released on 2012 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze a model of optimal consumption and portfolio selection in which consumption services are generated by holding a durable good. The durable good is illiquid in that a transaction cost must be paid when the good is sold. It is shown that optimal consumption is not a smooth function of wealth; it is optimal for the consumer to wait until a large change in wealth occurs before adjusting his consumption. As a consequence, the consumption based capital asset pricing model fails to hold. Nevertheless, it is shown that the standard, one factor, market portfolio based capital asset pricing model does hold in this environment. It is shown that the optimal durable level is characterized by three numbers (not random variables), say x, y, and z (where x lt; y lt; z). The consumer views the ratio of consumption to wealth (c/W) as his state variable. If this ratio is between x and z, then he does not sell the durable. If c/W is less than x or greater than z, then he sells his durable and buys a new durable of size S so that S/W = y. Thus y is his quot;targetquot; level of c/W. If the stock market moves up enough so that c/W falls below x, then he sells his small durable to buy a larger durable. However, there will be many changes in the value of his wealth for which c/W stays between x and z, and thus consumption does not change. Numerical simulations show that small transactions costs can make consumption changes occur very infrequently. Further, the effect of transactions costs on the demand for risky assets is substantial.
Book Synopsis Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods by :
Download or read book Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods written by and published by . This book was released on 1987 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Asset Pricing and Portfolio Choice in the Presence of Housing by : Robert F. Sarama
Download or read book Asset Pricing and Portfolio Choice in the Presence of Housing written by Robert F. Sarama and published by . This book was released on 2010 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: The second essay, "Non-durable Consumption Volatility and Illiquid Assets," finds that factors beyond the volatility of asset payoffs may significantly affect the volatility of the agent's consumption stream. The empirical failure of consumption-based asset pricing models is often attributed to the lack of volatility in aggregate measures of consumption. However, I illustrate in this paper that frictions faced by agents may lead to much higher levels of volatility in individual consumption than we observe in the aggregate data. I develop a life-cycle model of in which the consumer derives utility from non-durable consumption and stock in a risky asset: housing. Non-convex adjustment costs generate lumpy changes in the stock of the risky asset over the life-cycle. The model predicts that non-durable consumption volatility is increasing in both the ability to borrow against the assets held in the consumer's portfolio and in the illiquidity of the portfolio.
Book Synopsis Portfolio Choice with Illiquid Assets by : Miklós Koren
Download or read book Portfolio Choice with Illiquid Assets written by Miklós Koren and published by . This book was released on 2003 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Illiquid Assets and Optimal Portfolio Choice by : Eduardo S. Schwartz
Download or read book Illiquid Assets and Optimal Portfolio Choice written by Eduardo S. Schwartz and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: The presence of illiquid assets, such as human wealth, housing and a proprietorship substantially complicates the problem of portfolio choice. This paper is concerned with the problem of optimal asset allocation and consumption in a continuous time model when one asset cannot be traded. This illiquid asset, which depends on an uninsurable source of risk, provides a liquid dividend. In the case of human capital we can think about this dividend as labor income. The agent is endowed with a given amount of the illiquid asset and with some liquid wealth which can be allocated in a market where there is a risky and a riskless asset. The main point of the paper is that the optimal allocations to the two liquid assets and consumption will critically depend on the endowment and characteristics of the illiquid asset, in addition to the preferences and to the liquid holdings held by the agent. We provide what we believe to be the first analytical solution to this problem when the agent has power utility of consumption and terminal wealth. We also derive the value that the agent assigns to the illiquid asset. The risk adjusted valuation procedure we develop can be used to value both liquid and illiquid assets, as well as contingent claims on those assets.
Book Synopsis Portfolio Choice and Asset Pricing with Nontraded Assets by : Lars E. O. Svensson
Download or read book Portfolio Choice and Asset Pricing with Nontraded Assets written by Lars E. O. Svensson and published by . This book was released on 1988 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines portfolio choice and asset pricing when some assets are nontraded, for instance when a country cannot trade claims to its output on world capital markets, when a government cannot trade claims to future tax revenues, or when an individual cannot trade claims to his future wages. The close relation between portfolio choice with and implicit pricing of nontraded assets is emphasized. A variant of Cox, Ingersoll and Ross's Fundamental Valuation Equation is derived and used to interpret the optimal portfolio. Explicit solutions are presented to the portfolio and pricing problem for some special cases, including when income from the nontraded assets is a diffusion process, not spanned by traded assets, and affected by a state variable.
Book Synopsis Financial Asset Pricing Theory by : Claus Munk
Download or read book Financial Asset Pricing Theory written by Claus Munk and published by Oxford University Press, USA. This book was released on 2013-04-18 with total page 598 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book presents models for the pricing of financial assets such as stocks, bonds, and options. The models are formulated and analyzed using concepts and techniques from mathematics and probability theory. It presents important classic models and some recent 'state-of-the-art' models that outperform the classics.
Book Synopsis Asset Pricing and Asset Allocation in the Presence of Durable Consumption Goods by : Stephan Siegel
Download or read book Asset Pricing and Asset Allocation in the Presence of Durable Consumption Goods written by Stephan Siegel and published by . This book was released on 2006 with total page 200 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis International Portfolio Choice and Asset Pricing by : René M. Stulz
Download or read book International Portfolio Choice and Asset Pricing written by René M. Stulz and published by . This book was released on 1994 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: In general, theories of portfolio choice and asset pricing let investors differ at most with respect to their preferences, their wealth and, possibly, their information sets. If there are multiple countries, however, the investment and consumption opportunity sets of investors depend on their country of residence. International portfolio choice and asset pricing theories attempt to understand how the existence of country-specific investment and consumption opportunity sets affect the portfolios held by investors and the expected returns of assets. In this paper, we review these theories within a common framework, discuss how they fare in empirical tests, and assess their relevance for the field of international finance.
Book Synopsis Asset Pricing for Dynamic Economies by : Sumru Altug
Download or read book Asset Pricing for Dynamic Economies written by Sumru Altug and published by Cambridge University Press. This book was released on 2008-09-11 with total page 702 pages. Available in PDF, EPUB and Kindle. Book excerpt: This introduction to general equilibrium modelling takes an integrated approach to the analysis of macroeconomics and finance. It provides students, practitioners, and policymakers with an easily accessible set of tools that can be used to analyze a wide range of economic phenomena. Key features: • Provides a consistent framework for understanding dynamic economic models • Introduces key concepts in finance in a discrete time setting • Develops simple recursive approach for analyzing a variety of problems in a dynamic, stochastic environment • Sequentially builds up the analysis of consumption, production, and investment models to study their implications for allocations and asset prices • Reviews business cycle analysis and the business cycle implications of monetary and international models • Covers latest research on asset pricing in overlapping generations models and on models with borrowing constraints and transaction costs • Includes end-of-chapter exercises allowing readers to monitor their understanding of each topic Online resources are available at www.cambridge.org/altug_labadie
Book Synopsis Handbook of Stochastic Analysis and Applications by : D. Kannan
Download or read book Handbook of Stochastic Analysis and Applications written by D. Kannan and published by CRC Press. This book was released on 2001-10-23 with total page 800 pages. Available in PDF, EPUB and Kindle. Book excerpt: An introduction to general theories of stochastic processes and modern martingale theory. The volume focuses on consistency, stability and contractivity under geometric invariance in numerical analysis, and discusses problems related to implementation, simulation, variable step size algorithms, and random number generation.
Book Synopsis Investment Decisions on Illiquid Assets by : Jaroslaw Morawski
Download or read book Investment Decisions on Illiquid Assets written by Jaroslaw Morawski and published by Springer Science & Business Media. This book was released on 2009-02-14 with total page 467 pages. Available in PDF, EPUB and Kindle. Book excerpt: Jaroslaw Morawski offers a practicable and theoretically well-founded solution to the problems encountered when investing in illiquid assets and develops a model of the liquidation process for this category of investments. The result is a coherent investment decision framework designed specifically for private real estate but applicable also to other illiquid assets.
Book Synopsis Handbook of Financial Econometrics by : Yacine Ait-Sahalia
Download or read book Handbook of Financial Econometrics written by Yacine Ait-Sahalia and published by Elsevier. This book was released on 2009-10-19 with total page 809 pages. Available in PDF, EPUB and Kindle. Book excerpt: This collection of original articles—8 years in the making—shines a bright light on recent advances in financial econometrics. From a survey of mathematical and statistical tools for understanding nonlinear Markov processes to an exploration of the time-series evolution of the risk-return tradeoff for stock market investment, noted scholars Yacine Aït-Sahalia and Lars Peter Hansen benchmark the current state of knowledge while contributors build a framework for its growth. Whether in the presence of statistical uncertainty or the proven advantages and limitations of value at risk models, readers will discover that they can set few constraints on the value of this long-awaited volume. Presents a broad survey of current research—from local characterizations of the Markov process dynamics to financial market trading activity Contributors include Nobel Laureate Robert Engle and leading econometricians Offers a clarity of method and explanation unavailable in other financial econometrics collections
Book Synopsis The New Palgrave Dictionary of Economics by :
Download or read book The New Palgrave Dictionary of Economics written by and published by Springer. This book was released on 2016-05-18 with total page 7493 pages. Available in PDF, EPUB and Kindle. Book excerpt: The award-winning The New Palgrave Dictionary of Economics, 2nd edition is now available as a dynamic online resource. Consisting of over 1,900 articles written by leading figures in the field including Nobel prize winners, this is the definitive scholarly reference work for a new generation of economists. Regularly updated! This product is a subscription based product.
Book Synopsis NBER Macroeconomics Annual 2001 by : Ben S. Bernanke
Download or read book NBER Macroeconomics Annual 2001 written by Ben S. Bernanke and published by MIT Press. This book was released on 2002 with total page 398 pages. Available in PDF, EPUB and Kindle. Book excerpt: Current issues in macroeconomics.
Book Synopsis Dynamic Consumption-portfolio Choice and Asset Pricing with Non-price-taking Agents by : Suleyman Basak
Download or read book Dynamic Consumption-portfolio Choice and Asset Pricing with Non-price-taking Agents written by Suleyman Basak and published by . This book was released on 1994 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
