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Author (up) Castañeda, P.; Reus, L. doi  openurl
  Title Suboptimal investment behavior and welfare costs: A simulation based approach Type Journal Article
  Year 2019 Publication Finance Research Letters Abbreviated Journal Fin. Res. Let.  
  Volume to appear Issue Pages  
  Keywords Asset allocation; Martingale method; Portfolio selection; Suboptimal investment; Monte Carlo simulation; Welfare loss  
  Abstract We propose a representation of suboptimal investment behavior based on the stochastic discount factor (SDF) paradigm. Suboptimal investment behavior is rationalized as being the investor's optimal decision under a wrong SDF, while wealth trajectories and budget constraints are based on the true SDF. We develop a novel Monte Carlo simulation approach to compute the welfare costs for this suboptimal behavior. We study the suboptimal portfolio choice under CRRA preferences using two financial market models. The Monte Carlo simulation delivers comparable welfare losses to those computed in the original studies, which are based on partial differential equations (PDE) and – finite-difference schemes.  
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  Corporate Author Thesis  
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  Language Summary Language Original Title  
  Series Editor Series Title Abbreviated Series Title  
  Series Volume Series Issue Edition  
  ISSN 1544-6123 ISBN Medium  
  Area Expedition Conference  
  Notes Approved no  
  Call Number UAI @ eduardo.moreno @ Serial 936  
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