Long term optimal investment with regime switching: inflation, information and short sales

Mondher Bellalah (), Akeb Hakim (), Kehan Si () and Detao Zhang ()
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Mondher Bellalah: Cy Cergy Paris University
Akeb Hakim: ISC Paris Business School
Kehan Si: Shandong University
Detao Zhang: Shandong University

Annals of Operations Research, 2022, vol. 313, issue 2, No 32, 1373-1386

Abstract: Abstract Financial models are based on the standard assumptions of frictionless markets, complete information, no transaction costs and no taxes and borrowing and short selling without restrictions. Short-selling bans around the world after the global financial crisis and in several exchanges during the COVID 19 period, become more and more important. This paper bridges the gap by providing for the first time in the literature a model that accounting explicitly and simultaneously for inflation, information costs and short sales in the portfolio performance with regime switching. Our model can be used by portfolio managers to assess the impact of these market imperfections on portfolio decisions.

Keywords: Information costs; Short selling costs; Inflation rate; Regime switching (search for similar items in EconPapers)
JEL-codes: G3 G31 G32 G33 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10479-020-03692-8

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