Portfolio allocation problems between risky and ambiguous assets

Takao Asano, Yusuke Osaki

Research output: Contribution to journalArticle

Abstract

This paper considers a portfolio allocation problem between a risky asset and an ambiguous asset, and investigates how greater ambiguity aversion influences the optimal proportion invested in the two assets. We derive several sufficient conditions under which greater ambiguity aversion decreases the optimal proportion invested in the ambiguous asset. Furthermore, we consider an international diversification problem as an application and show that ambiguity aversion partially resolves the home bias puzzle.

Original languageEnglish
JournalAnnals of Operations Research
DOIs
Publication statusPublished - 2019 Jan 1

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Allocation problem
Assets
Portfolio allocation
Ambiguity aversion
Proportion
International diversification
Home bias

Keywords

  • Greater ambiguity aversion
  • Home bias puzzle
  • Portfolio allocation problem
  • Smooth ambiguity model
  • Uncertainty modelling

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Management Science and Operations Research

Cite this

Portfolio allocation problems between risky and ambiguous assets. / Asano, Takao; Osaki, Yusuke.

In: Annals of Operations Research, 01.01.2019.

Research output: Contribution to journalArticle

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