Interpreting Home-Bias Puzzle through Minimizing Portfolio Value Loss under Model Uncertainty

• Main Authors: Wang, Min-Ju, 王敏如
• Other Authors: Huang, Yu-Lieh
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/rh3k8u

碩士 === 國立清華大學 === 計量財務金融學系 === 102 === This paper means to discuss home bias phenomenon through minimizing expected loss level perspective. As investors concern about model uncertainty, they are afraid of unexpected value depreciation of holding assets due to model uncertainty. In this way, we formulate an expected loss model incorporated with model uncertainty concerns. We follow Andersen et al. (1999), Hansen et al. (1999) and Maenhout (1999) to construct a robust control model with constraint conditions. We solve the optimal ratios to allocate asset into different countries through Hamilton-Jacobi-Bellman equation. Furthermore, we extend concept of multiple resources of model uncertainty in Uppal and Wang (2003). Not only incorporate we a parameter that represents all level of ambiguity into objective function but also we add a matrix that reflects different levels of marginal ambiguity.