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SUMMARY:Where Experience Matters: Asset Allocation and Asset Pricing with 
 Opaque and Illiquid Assets
DTSTART:20150612T103000
DTEND:20150612T120000
DTSTAMP:20260408T050335Z
UID:274800fc955969b647a8ea0e4c7ee2d71fb8c5b021cfbbb744b5bc57
CATEGORIES:Conferences - Seminars
DESCRIPTION:Raman UPPAL (EDHEC Business School\, London)\nAlternative asse
 ts\, such as private equity\, hedge funds\, and real assets\, are illiquid
  and opaque\, and thus pose a challenge to traditional models of asset all
 ocation. In this paper\, we study asset allocation and asset pricing in a 
 generalequilibrium model with liquid assets and an alternative risky asset
 \, which is opaque and incurs transaction costs\, and investors who differ
  in their experience in assessing the alternative asset. We find that the 
 optimal asset-allocation strategy of the relatively inexperienced investor
 s is to initially tilt their portfolio away from the alternative asset and
  to hold more of it with experience. Counterintuitively\, a decrease in th
 e transaction cost for the alternative asset increases the portfolio tilt 
 at the initial date\, and hence\, the liquidity discount. Transaction cost
 s may induce inexperienced investors to hold a majority of the illiquid as
 set at later dates\, even if they are pessimistic about future payoff\ns\,
  and produce a sizable liquidity discount. During periods when the alterna
 tive asset is illiquid\, investors trade the liquid equity index instead\,
  leading to strong spillover effects.
LOCATION:UNIL\, Extranef\, room 126 https://planete.unil.ch/plan/?local=EX
 T-126
STATUS:CONFIRMED
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