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The Finance Professor Podcast is hosted by Linus Wilson. Dr. Wilson earned his Ph.D. in 2007 from Oxford University. He has taught thousands of finance students at all levels. His research is in banking, financial crises, CEO pay, and corporate finance. He has been a source for over two hundred major news stories in the Wall Street Journal, New York Times, Financial Times, and other news organizations. He is a leading scholar on the TARP bank bailouts of the great recession.
Episodes
Wednesday May 17, 2017
Wednesday May 17, 2017
Professor Linus Wilson reads his paper "Discrete Portfolio Adjustment with Fixed Transaction Costs"
Suggested Citation:
Wilson, Linus, Discrete Portfolio Adjustment with Fixed Transaction Costs (January 3, 2016). Available at SSRN: https://ssrn.com/abstract=2406021 or http://dx.doi.org/10.2139/ssrn.2406021
Abstract
This paper presents a closed form solution to the portfolio adjustment problem in discrete time when the investor faces fixed transaction costs. This transaction cost model assumes a mean-variance investor who wants to adjust her holdings of a risky and risk-free asset. It is shown how this model can be calibrated to be used with a variety of risk models such as life cycle portfolio weights and value at risk (VaR) models. The decision problem can easily be inputted into and calculated in Excel.
Keywords: adjustment costs, alpha models, brokerage commissions, fixed costs, lifecycle funds, portfolio selection, portfolio theory, risk management, transaction costs, Value at Risk (VaR)
JEL Classification: G11
Click the orange download button to get the full paper on SSRN.
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