Dynamic portfolio choice with frictions

• 成果类型: Article
• 署名作者: Garleanu, Nicolae; Pedersen, Lasse Heje
• 署名单位: University of California System; University of California Berkeley; National Bureau of Economic Research; Centre for Economic Policy Research - UK; Copenhagen Business School; New York University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2016.06.001
• 发表日期: 2016
• 页码: 487-516
• 关键词: Dynamic trading; frictions; transaction costs; continuous time; predictability; equilibrium

摘要

We show how portfolio choice can be modeled in continuous time with transitory and persistent transaction costs, multiple assets, multiple signals predicting returns, and general signal dynamics. The objective function is derived from the limit of discrete-time models with endogenous transaction costs due to optimal dealer behavior. We solve the model explicitly and the intuitive solution is also the limit of the solutions of the corresponding discrete-time models. We show how the optimal high-frequency trading strategy depends on the nature of the trading costs, which in turn depend on dealers' inventory dynamics. Finally, we provide equilibrium implications and illustrate the model's broader applicability to micro- and macro-economics, monetary policy, and political economy. (C) 2016 The Author(s). Published by Elsevier Inc.