Portfolio choice with high frequency data: constant relative risk aversion preferences and the liquidity effect

Subject Areas : Financial engineering

mohammad firouzdehghan ¹ ( Graduate Student of Accounting, Qhazvin Branch, Islamic Azad University, Ghazvin, Iran. )
Hadi Saeidi ² ( Assistant Professor, Department of Accounting, Shirvan Branch, Islamic Azad University, Shirvan, Iran )
Shaban Mohammadi ³ ( MSc. Department of Accounting, Hakim Nezami institution of higher education at Quchan , Iran )
ghasem elahi ⁴ ( Assistant Professor of Economy, Shirvan Branch, Islamic Azad University, Shirvan, Iran )

Received: 2018-07-18 Accepted : 2018-11-03 Published : 2019-03-21

Keywords: Portfolio Selection, high frequency data, Constant relative risk aversion,

Abstract :

 An investor Constant relative risk aversion. pursues two goals of expected utility increases and reduces expected portfolio liquidity expectations. In the current study, the Constant relative risk aversion. utility using actual portfolio fluctuations, real asymmetry, real elongation of graphs and non-liquidity The portfolios were measured using the non-liquidity rate. Therefore, it is possible to directly select the options of the investor in the two-dimensional expected utility / liquidity space. This research was analyzed by using high frequency data on a set of 40 shares of Tehran Stock Exchange from 2011 to 2017 using MATLAB software and time retrieval methods were used for daily synchronization of transactions. Considering the expected returns of the portfolio and the expected liquidity over the minimum variance and the same weighted portfolio, the power coverage of this model is examined. The results show that in the different risk-incompatible levels, the expected liquidity of the expected portfolio is highly competitive and seems appropriate in terms of usefulness, liquidity, and expected utility, relative to the benchmark.