Related papers: Behavioral Portfolio Selection in Continuous Time
This paper extends the classical consumption and portfolio rules model in continuous time (Merton 1969, 1971) to the framework of decision-makers with time-inconsistent preferences. The model is solved for different utility functions for…
This study examines portfolio selection using predictive models for portfolio returns. Portfolio selection is a fundamental task in finance, and a variety of methods have been developed to achieve this goal. For instance, the mean-variance…
We introduce an infinite-horizon, continuous-time portfolio selection problem faced by an agent with periodic S-shaped preference and present bias. The inclusion of a quasi-hyperbolic discount function leads to time-inconsistency and we…
We pursue an inverse approach to utility theory and consumption & investment problems. Instead of specifying an agent's utility function and deriving her actions, we assume we observe her actions (i.e. her consumption and investment…
We consider a continuous-time game-theoretic model of an investment market with short-lived assets and endogenous asset prices. The first goal of the paper is to formulate a stochastic equation which determines wealth processes of investors…
Lotteries are a prevalent form of gambling between a seller and buyers. Designing a lottery requires a model of how buyers make decisions when confronted with uncertain outcomes. Cumulative prospect theory (CPT) is a descriptive model that…
Kahneman & Tversky's $\textit{prospect theory}$ tells us that humans perceive random variables in a biased but well-defined manner (1992); for example, humans are famously loss-averse. We show that objectives for aligning LLMs with human…
We study a continuous-time portfolio choice problem for an investor whose state-dependent preferences are determined by an exogenous factor that evolves as an It\^o diffusion process. Since risk attitudes at the end of the investment…
We study the Merton portfolio management problem within a complete market, non constant time discount rate and general utility framework. The non constant discount rate introduces time inconsistency which can be solved by introducing sub…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
This paper considers a robust time-consistent mean-variance-skewness portfolio selection problem for an ambiguity-averse investor by taking into account wealth-dependent risk aversion and wealth-dependent skewness preference as well as…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
We investigate a portfolio selection problem involving multi competitive agents, each exhibiting mean-variance preferences. Unlike classical models, each agent's utility is determined by their relative wealth compared to the average wealth…
We consider a model of optimal investment and consumption with both habit formation and partial observations in incomplete It\^{o} processes market. The investor chooses his consumption under the addictive habits constraint while only…
We consider an expected utility maximization problem where the utility function is not necessarily concave and the time horizon is uncertain. We establish a necessary and sufficient condition for the optimality for general non-concave…
We study continuous-time mean--variance portfolio selection in markets where stock prices are diffusion processes driven by observable factors that are also diffusion processes, yet the coefficients of these processes are unknown. Based on…
A family of models of individual discrete choice are constructed by means of statistical averaging of choices made by a subject in a reinforcement learning process, where the subject has short, k-term memory span. The choice probabilities…
We introduce predictable relative forward performance processes (PRFPP) as a new framework for studying portfolio management within a competitive and incomplete market environment. Each agent trades a distinct stock following a binomial…
We study a n-player and mean-field portfolio optimization problem under relative performance concerns with non-zero volatility, for wealth and consumption. The consistency assumption defining forward relative performance processes leads to…