EconPapers    
Economics at your fingertips  
 

Dynamic Asset Allocation with Event Risk

Jun Liu, Francis Longstaff and Jun Pan

Journal of Finance, 2003, vol. 58, issue 1, 231-259

Abstract: Major events often trigger abrupt changes in stock prices and volatility. We study the implications of jumps in prices and volatility on investment strategies. Using the event-risk framework of Duffie, Pan, and Singleton (2000), we provide analytical solutions to the optimal portfolio problem. Event risk dramatically affects the optimal strategy. An investor facing event risk is less willing to take leveraged or short positions. The investor acts as if some portion of his wealth may become illiquid and the optimal strategy blends both dynamic and buy-and-hold strategies. Jumps in prices and volatility both have important effects. Copyright 2003 by the American Finance Association.

Date: 2003
References: Add references at CitEc
Citations View citations in EconPapers (97) Track citations by RSS feed

Downloads: (external link)
http://www.blackwell-synergy.com/servlet/useragent ... &year=2003&part=null link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Dynamic Asset Allocation With Event Risk (2002) Downloads
Working Paper: Dynamic Asset Allocation with Event Risk (2001) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:58:y:2003:i:1:p:231-259

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Series data maintained by Wiley-Blackwell Digital Licensing ().

 
Page updated 2017-12-17
Handle: RePEc:bla:jfinan:v:58:y:2003:i:1:p:231-259