The DOI matches its Crossref record; 1 of the 1 references it cites were found in a registry or an index.
Optimal Portfolio Choice and the Valuation of Illiquid Securities
Open accessAbstract
Traditional models of portfolio choice assume that investors can continuously trade unlimited amounts of securities. In reality, investors face liquidity constraints. I analyze a model where investors are restricted to trading strategies that are of bounded variation. An investor facing this type of illiquidity behaves very differently from an unconstrained investor. A liquidity-constrained investor endogenously acts as if facing borrowing and short-selling constraints, and one may take riskier positions than in liquid markets. I solve for the shadow cost of illiquidity and show that large price discounts can be sustained in a rational model.
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Citations
Cites
The pricing of options and corporate liabilities
Black, F., & Scholes, M. (1973) · Journal of Political Economy · doi:10.1086/260062 · Cited by 29,074
Cited by
Amihud, Y., Mendelson, H., & Pedersen, L. H. (2005) · Foundations and Trends® in Finance · doi:10.1561/0500000003 · Cited by 820
Metadata
- Authors
- Longstaff, F. A.
- Venue
- Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2001-04
- Volume
- 14
- Issue
- 2
- Pages
- 407-431
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W2153332182
- Cited by
- 320
- References
- 1
- FWCI
- 19.25
- Type
- journal article
- Language
- en
- Open access
- green
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
