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The Effect of Information Quality on Optimal Portfolio Choice

Författare:
Redaktör:
  • Arnold R. Cowan
Publiceringsår: 2006
Språk: Engelska
Sidor: 157-185
Publikation/Tidskrift/Serie: The Financial Review
Volym: 41
Nummer: 2
Dokumenttyp: Artikel
Förlag: Blackwell

Sammanfattning

Three types of agents acting on different information sets are considered: fully informed agents, insiders, and outsiders. Differences in information quality are shown to affect the properties of their optimal portfolios. For an outsider, the share of wealth invested in the stock is decreasing in the variance of the stock. However, for an insider, the effect of an increasing stock variance on the optimal portfolio weight is ambiguous. In a calibration to U.S. data, the confidence intervals of the insider’s demand for the stock converge, whereas the outsider’s confidence intervals become wider.

Disputation

Nyckelord

  • Business and Economics
  • incomplete information
  • learning
  • estimation risk
  • portfolio choice
  • hedging demands

Övriga

Published
Yes
  • ISSN: 0732-8516

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