| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 5099788 | Journal of Economic Dynamics and Control | 2008 | 11 Pages |
Abstract
The paper analyzes the intensity of choice in an agent based financial optimization problem. Mean-variance optimizing agents choose among mutual funds of similar styles but varying performance. We specify a model for the allocation of new funds, switching between funds, and withdrawals and obtain statistically significant estimates of the intensity of choice parameter. This estimate is also given economic interpretation through the underperformance of funds that use an active style. We find that agents with relative risk aversion of 2 will move 1% of their funds from active to passive for an extra 34 basis points of return.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
David Goldbaum, Bruce Mizrach,