Liquidity and conditional portfolio choice: A nonparametric investigation |
| |
Authors: | Eric Ghysels Joo Pedro Pereira |
| |
Institution: | aDepartment of Economics, UNC and Department of Finance, Kenan-Flagler Business School, United States;bFinance Department ISCTE Business School - Lisbon, Portugal |
| |
Abstract: | This paper studies the relation between liquidity and optimal portfolio allocations. Given that the portfolio problem of a constant relative risk aversion investor does not have a closed-form solution, we use a nonparametric approach to estimate the optimal allocations. Using a sample of NYSE stocks from 1963–2000, we find that the optimal portfolio weight in small stocks is strongly increasing in liquidity at short daily and weekly horizons. This result is consistent for three different measures of liquidity: price impact, dollar volume, and turnover. However, liquidity does not influence the optimal portfolio choice for large stocks, nor for longer monthly investment horizons. |
| |
Keywords: | Liquidity Conditional Portfolio Choice Nonparametric |
本文献已被 ScienceDirect 等数据库收录! |
|