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Optimal Portfolio Choice Under Shadow Costs with Fixed Assets when Time-Horizon Is Uncertain

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Abstract

We analyze in this paper the problem of choosing the optimal portfolio for investors under uncertain exit random time. We consider the portfolio choice with fixed assets in the presence of information costs and short sales constraints. This context allows us to focus on the optimal portfolio choice with fixed assets. Investors aim to maximize the ratio between the wealth and the value of the fixed assets. We obtain the optimal portfolio choice strategy with fixed assets when the time horizon is a random exit time. Our results are new in the literature. We illustrate the main findings through some simulation results.

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Acknowledgements

This work was supported by National Natural Science Foundation of China (Grant Nos. 11401345, 11601285, 11831010, 61573217).

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Authors and Affiliations

  1. Cy Cergy Paris University, Cergy, France

    Mondher Bellalah

  2. ISC Paris Business School, Paris, France

    Mondher Bellalah

  3. School of Economics, Shandong University, Jinan, China

    Detao Zhang

  4. School of Control Science and Engineering, Shandong University, Jinan, China

    Panpan Zhang

Authors
  1. Mondher Bellalah
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  2. Detao Zhang
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  3. Panpan Zhang
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Correspondence to Detao Zhang.

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Bellalah, M., Zhang, D. & Zhang, P. Optimal Portfolio Choice Under Shadow Costs with Fixed Assets when Time-Horizon Is Uncertain. Comput Econ 56, 5–20 (2020). https://doi.org/10.1007/s10614-020-09991-3

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  • DOI: https://doi.org/10.1007/s10614-020-09991-3

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