Portfolio Selection with Endogenous Estimation Risk

Diego Nocetti ()
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Diego Nocetti: The University of Memphis

Economics Bulletin, 2006, vol. 7, issue 6, 1-9

Abstract: I explore how investors allocate mental effort to learn about the mean return of a number of assets and I analyze how this allocation changes the portfolio selection problem. I show that the endogeneity of estimation risk alters the comparative statics of portfolio choice and provides an explanation to Huberman's (2001) empirical findings that “Familiarity Breeds Investment”.

JEL-codes: D8 G1 (search for similar items in EconPapers)
Date: 2006-09-26
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