Optimal Consumption And Investment With Transaction Costs And Multiple Risky Assets  

Oleh:

Hong Liu

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 59 no. 1 (Feb. 2004), page 289-338.
Topik: transaction cost; risk aversion; investment policy; costs; return on investment; studies; correlation analysis; mathematical models
Fulltext: p 289.pdf (475.94KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

We consider the optimal intertemporal consumption and investment policy of a CARA investor who faces fixed and proportional transaction costs when trading multiple risky assets. We show that when asset returns are uncorrelated, the optimal investment policy is to keep the dollar amount invested in each risky asset between two constant levels and upon reaching either of these thresholds, to trade to the corresponding optimal targets. An extensive analysis suggests that transaction cost is an important factor in affecting trading volume and that it can significantly diminish the importance of stock return predictability as reported in the literature.

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