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. 2022;313(2):1373-1386.
doi: 10.1007/s10479-020-03692-8. Epub 2020 Jun 28.

Long term optimal investment with regime switching: inflation, information and short sales

Mondher Bellalah  1   2 , Akeb Hakim  2 , Kehan Si  3 , Detao Zhang  4
Affiliations

Long term optimal investment with regime switching: inflation, information and short sales

Mondher Bellalah et al. Ann Oper Res. 2022.

Abstract

Financial models are based on the standard assumptions of frictionless markets, complete information, no transaction costs and no taxes and borrowing and short selling without restrictions. Short-selling bans around the world after the global financial crisis and in several exchanges during the COVID 19 period, become more and more important. This paper bridges the gap by providing for the first time in the literature a model that accounting explicitly and simultaneously for inflation, information costs and short sales in the portfolio performance with regime switching. Our model can be used by portfolio managers to assess the impact of these market imperfections on portfolio decisions.

Keywords: Inflation rate; Information costs; Regime switching; Short selling costs.

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Figures

Fig. 1
Fig. 1
Graph of x∗(t) respect with t
Fig. 2
Fig. 2
Graph of π∗ respect with t
See this image and copyright information in PMC

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