Estimating the intensity of choice in a dynamic mutual fund allocation decision

Goldbaum, D; Mizrach, B

Estimating the intensity of choice in a dynamic mutual fund allocation decision

Goldbaum, D

Mizrach, B

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Publication Type:: Journal Article
Citation:: Journal of Economic Dynamics and Control, 2008, 32 (12), pp. 3866 - 3876
Issue Date:: 2008-12-01

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Field	Value	Language
dc.contributor.author	Goldbaum, D https://orcid.org/0000-0002-4228-1408	en_US
dc.contributor.author	Mizrach, B	en_US
dc.date.issued	2008-12-01	en_US
dc.identifier.citation	Journal of Economic Dynamics and Control, 2008, 32 (12), pp. 3866 - 3876	en_US
dc.identifier.issn	0165-1889	en_US
dc.identifier.uri	http://hdl.handle.net/10453/9979
dc.description.abstract	The paper analyzes the intensity of choice in an agent based financial optimization problem. Mean-variance optimizing agents choose among mutual funds of similar styles but varying performance. We specify a model for the allocation of new funds, switching between funds, and withdrawals and obtain statistically significant estimates of the intensity of choice parameter. This estimate is also given economic interpretation through the underperformance of funds that use an active style. We find that agents with relative risk aversion of 2 will move 1% of their funds from active to passive for an extra 34 basis points of return. © 2008.	en_US
dc.relation.ispartof	Journal of Economic Dynamics and Control	en_US
dc.relation.isbasedon	10.1016/j.jedc.2008.04.002	en_US
dc.subject.classification	Economics	en_US
dc.title	Estimating the intensity of choice in a dynamic mutual fund allocation decision	en_US
dc.type	Journal Article
utslib.citation.volume	12	en_US
utslib.citation.volume	32	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1401 Economic Theory	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
dc.location.activity	Washington DC, USA
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	open_access
pubs.issue	12	en_US
pubs.publication-status	Published	en_US
pubs.volume	32	en_US

Abstract:

The paper analyzes the intensity of choice in an agent based financial optimization problem. Mean-variance optimizing agents choose among mutual funds of similar styles but varying performance. We specify a model for the allocation of new funds, switching between funds, and withdrawals and obtain statistically significant estimates of the intensity of choice parameter. This estimate is also given economic interpretation through the underperformance of funds that use an active style. We find that agents with relative risk aversion of 2 will move 1% of their funds from active to passive for an extra 34 basis points of return. © 2008.

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http://hdl.handle.net/10453/9979