ELECCION DE PORTAFOLIO EN PRESENCIA DE MERCADOS ILIQUIDOS

Luis Felipe Varas Greene ()
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Luis Felipe Varas Greene: Escuela de Administración, Pontificia Universidad Católica de Chile

Abante, 2006, vol. 9, issue 2, pages 79-97

Abstract: This paper addresses the portfolio selection of an investor facing illiquid markets and analyzes what the portfolio choice would be if the investor were unable to trade at all times. It is assumed that the investor can only trade at some intervals of time with an exponential distribution. In this setting, a new dimension of risk is added owing to the impossibility of modifying the portfolio. Finally, for a reasonable set of parameters, the portfolio choice model is able to rationalize the liquidity premium reported in the previous empirical literature.

Keywords: Portfolio Choice; Liquidity (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2006

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Persistent link: http://EconPapers.repec.org/RePEc:pch:abante:v:9:y:2006:i:2:p:79-97

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