Kozhan, Roman (2006) Multiple priors and no-transaction region. Working Paper. Coventry: Warwick Business School, Financial Econometrics Research Centre. (Working papers (Warwick Business School. Financial Econometrics Research Centre)).

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Abstract

We study single period asset allocation problems of the investor who maximizes the expected utility with respect to non-additive beliefs. The non-additive beliefs of the investor model the presence of an uncertainty and they are assumed to be consistent with the Maxmin expected utility theory of Gilboa and Schmeidler (1989). The proportional transaction costs are incorporated into the model. We provide the explicit form solutions for the bounds of no-transaction regions which completely determine the optimal policy of the investor.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory
Divisions:	Faculty of Social Sciences > Warwick Business School > Financial Econometrics Research Centre Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH):	Utility theory, Transaction costs, Uncertainty (Information theory), Portfolio management
Series Name:	Working papers (Warwick Business School. Financial Econometrics Research Centre)
Publisher:	Warwick Business School, Financial Econometrics Research Centre
Place of Publication:	Coventry
Date:	2006
Number:	No.06-
Number of Pages:	26
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/1745

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