To the top

Page Manager: Webmaster
Last update: 9/11/2012 3:13 PM

Tell a friend about this page
Print version

Asymmetries and Portfolio… - University of Gothenburg, Sweden Till startsida
Sitemap
To content Read more about how we use cookies on gu.se

Asymmetries and Portfolio Choice

Journal article
Authors Magnus Dahlquist
Adam Farago
Roméo Tédongap
Published in The Review of financial studies
Volume 30
Issue 2
Pages 667-702
ISSN 0893-9454
Publication year 2017
Published at Centre for Finance
Department of Economics
Pages 667-702
Language en
Links doi.org/10.1093/rfs/hhw091
Subject categories Economics

Abstract

We examine the portfolio choice of an investor with generalized disappointment-aversion preferences who faces log returns described by a normal-exponential model. We derive a three-fund separation strategy: the investor allocates wealth to a risk-free asset, a standard mean-variance efficient fund, and an additional fund reflecting return asymmetries. The optimal portfolio is characterized by the investor’s endogenous effective risk aversion and implicit asymmetry aversion. In empirical applications, we find that disappointment aversion is associated with much larger asymmetry aversion than are standard preferences. Our model explains patterns in popular portfolio advice across both risk appetites and investment horizons.

Page Manager: Webmaster|Last update: 9/11/2012
Share:

The University of Gothenburg uses cookies to provide you with the best possible user experience. By continuing on this website, you approve of our use of cookies.  What are cookies?