Dynamic portfolio selection with mispricing and model ambiguity
The authors introduce a financial market model with mispriced stocks. A robust problem for an ambiguity-averse investor with constant relative risk aversion utility is presented and solved under the market with mispricing and constant risk premium. They investigate the robust optimal strategies under observed and unobserved mean-reverting stochastic risk premium. Finally, they provide empirical examples and discuss the utility losses for ignoring mispricing and ignoring ambiguity: the optimal strategy is dependent on the liquidity parameters for stocks, which are very difficult to estimate. Thus, a wise investor should consider ambiguity on the mispricing model when making decisions about investing in the mispriced assets.
- Optimal portfolio strategies with mispricing and stochastic volatility
- Good deals and benchmarks in robust portfolio selection
- Continuous-time portfolio selection under ambiguity
- Portfolio diversification and model uncertainty: A robust dynamic mean‐variance approach
- Ambiguity in portfolio selection
- Continuous Markov processes and stochastic equations
- scientific article; zbMATH DE number 49106 (Why is no real title available?)
- scientific article; zbMATH DE number 192908 (Why is no real title available?)
- scientific article; zbMATH DE number 1153603 (Why is no real title available?)
- scientific article; zbMATH DE number 1546925 (Why is no real title available?)
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