Optimal portfolio selection with uncertain implicit transaction costs in a dynamic stochastic framework

dc.contributor.advisorChikobvu, Delson
dc.contributor.authorMushori, Sabastine
dc.date.accessioned2020-02-19T11:05:20Z
dc.date.available2020-02-19T11:05:20Z
dc.date.issued2019-07
dc.description.abstractThis thesis proposes scenario-based approaches and decision models for some problem contexts in investment decision-making which include (i) optimal portfolio investment in periods of economic booms and recessions, (ii) the incorporation of uncertainty in implicit transaction costs incurred in initial trading and in subsequent rebalancing of portfolios, and (iii) the development of a strategy that captures uncertainty in stock prices and in corresponding implicit trading costs by way of scenarios. The method ological advances of the thesis offer several novel insights into the above decision problems. Firstly, the mean absolute deviation model is developed and extended into a stochastic multi-stage model that incorporates uncertainty of implicit transaction costs, asset returns and risk in optimal portfolio selection. This methodology allows investors and investment managers to choose optimal portfolios realising the impact of associated uncertain implicit transaction costs. Secondly, a stochastic multi-stage trading cost model is developed that also takes into account uncertainty of implicit transaction costs, assets’ returns and portfolio risk. This strategy generates optimal portfolios by minimising total implicit transaction costs incurred. Thirdly, a multi-stage stochastic optimal portfolio policy that minimises maximum downside risk in the presence of uncertain implicit transaction costs is proposed. This strategy is appropriate for a risk-averse and conservative investor who is highly concerned about the performance of his portfolio in an economic recession environment. Fourthly, a dynamic stochastic methodology in optimal portfolio selection that maximises upside deviations (investment opportunities) and minimises maximum downside risk while taking into account uncertain implicit transaction costs incurred in initial trading and recourse times is developed. Lastly, the mean-variance model is extended to become multi-period and to incorporate uncertainty in implicit transaction costs, asset returns and portfolio risk. All the proposed models capture uncertainty in implicit transaction costs, portfolio return and risk by way of scenarios.en_ZA
dc.identifier.urihttp://hdl.handle.net/11660/10406
dc.language.isoenen_ZA
dc.publisherUniversity of the Free Stateen_ZA
dc.rights.holderUniversity of the Free Stateen_ZA
dc.subjectThesis (Ph.D. (Mathematical Statistics))--University of the Free State, 2019en_ZA
dc.subjectStochastic modelingen_ZA
dc.subjectUncertain implicit transaction costsen_ZA
dc.subjectDownside risken_ZA
dc.subjectUncertaintyen_ZA
dc.subjectInvestment opportunityen_ZA
dc.titleOptimal portfolio selection with uncertain implicit transaction costs in a dynamic stochastic frameworken_ZA
dc.typeThesisen_ZA
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