TY  - BOOK
AU  - Dai,Min
AU  - Qin,Cong
AU  - Wang,Neng
ED  - National Bureau of Economic Research.
TI  - Portfolio Rebalancing with Realization Utility
T2  - NBER working paper series
PY  - 2022///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - March 2022; Hardcopy version available to institutional subscribers
N2  - We develop a model where a realization-utility investor (Barberis and Xiong, 2009, 2012; Ingersoll and Jin, 2013) optimally targets her liquid-illiquid wealth ratio at a constant w∗. By saving in the risk-free asset (w∗ > 0), she makes smaller bets in the illiquid asset and realizes gains/losses more frequently. By leveraging (w∗ < 0), she makes bets larger than her equity and realizes gains/losses less frequently. For a discontinuous/jump-diffusion price process, the solution features four regions: loss-realization, gain-realization, and two disconnected (deep-loss and normal) holding regions. We generate a quantitatively significant non-monotonic propensity to realize losses consistent with evidence
UR  - https://www.nber.org/papers/w29821
UR  - http://dx.doi.org/10.3386/w29821
ER  -