Related papers: Extensions to the Wealth Tax Neutrality Framework
When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a…
This paper develops a unified framework that integrates behavioral distortions into rational portfolio optimization by extracting implied probability weighting functions (PWFs) from optimal portfolios modeled under Gaussian and…
Based on a rough path foundation, we develop a model-free approach to stochastic portfolio theory (SPT). Our approach allows to handle significantly more general portfolios compared to previous model-free approaches based on F{\"o}llmer…
In this paper, we investigate the Merton portfolio management problem in the context of non-exponential discounting. This gives rise to time-inconsistency of the decision-maker. If the decision-maker at time t=0 can commit his/her…
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…
This paper proposes a portfolio construction framework designed to remain robust under estimation error, non-stationarity, and realistic trading constraints. The methodology combines dynamic asset eligibility, deterministic rebalancing, and…
Recent work has emphasized the diversification benefits of combining trend signals across multiple horizons, with the medium-term window-typically six months to one year-long viewed as the "sweet spot" of trend-following. This paper…
In hedge funds, convex compensation schemes are adopted to stimulate a high-profit performance for portfolio managers. In economics, non-monotone risk aversion is proposed to argue that individuals may not be risk-averse when the wealth…
This paper develops and estimates a multivariate affine GARCH(1,1) model with Normal Inverse Gaussian innovations that captures time-varying volatility, heavy tails, and dynamic correlation across asset returns. We generalize the…
We consider the following problem in stochastic portfolio theory. Are there portfolios that are relative arbitrages with respect to the market portfolio over very short periods of time under realistic assumptions? We answer a slightly…
We study the optimal portfolio allocation problem from a Bayesian perspective using value at risk (VaR) and conditional value at risk (CVaR) as risk measures. By applying the posterior predictive distribution for the future portfolio…
Shorting for hedging exposes to risk when the market dynamics is uncertain. Managing uncertainty and risk exposure is key in portfolio management practice. This paper develops a robust framework for dynamic minimum-variance hedging that…
We study the wealth distribution of UK households through a detailed analysis of data from wealth surveys and rich lists, and propose a non-linear Kesten process to model the dynamics of household wealth. The main features of our model are…
Sparsity or complexity? In modern high-dimensional asset pricing, these are often viewed as competing principles: richer feature spaces appear to favor complexity, while economic intuition has long favored parsimony. We show that this…
We consider the estimation of the multi-period optimal portfolio obtained by maximizing an exponential utility. Employing Jeffreys' non-informative prior and the conjugate informative prior, we derive stochastic representations for the…
This paper studies a continuous-time portfolio selection problem under a general distribution of random risk aversion (RRA). We provide a complete characterization of all deterministic equilibrium strategies in closed form. Our results show…
We examine the issue of sensitivity with respect to model parameters for the problem of utility maximization from final wealth in an incomplete Samuelson model and mainly, but not exclusively, for utility functions of positive power-type.…
This paper solves the consumption-investment problem under Epstein-Zin preferences on a random horizon. In an incomplete market, we take the random horizon to be a stopping time adapted to the market filtration, generated by all observable,…
We develop a continuous-time general equilibrium framework for economies with a heterogeneous population -- modeled as a continuum -- that repeatedly optimizes over short horizons under relative-income (Duesenberry-type) criteria. The…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…