تقرير
Optimal Investment with Herd Behaviour Using Rational Decision Decomposition
| العنوان: | Optimal Investment with Herd Behaviour Using Rational Decision Decomposition |
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| المؤلفون: | Wang, Huisheng, Zhao, H. Vicky |
| سنة النشر: | 2024 |
| المجموعة: | Computer Science Mathematics Quantitative Finance |
| مصطلحات موضوعية: | Electrical Engineering and Systems Science - Systems and Control, Mathematics - Optimization and Control, Quantitative Finance - Mathematical Finance, Quantitative Finance - Portfolio Management |
| الوصف: | In this paper, we study the optimal investment problem considering the herd behaviour between two agents, including one leading expert and one following agent whose decisions are influenced by those of the leading expert. In the objective functional of the optimal investment problem, we introduce the average deviation term to measure the distance between the two agents' decisions and use the variational method to find its analytical solution. To theoretically analyze the impact of the following agent's herd behaviour on his/her decision, we decompose his/her optimal decision into a convex linear combination of the two agents' rational decisions, which we call the rational decision decomposition. Furthermore, we define the weight function in the rational decision decomposition as the following agent's investment opinion to measure the preference of his/her own rational decision over that of the leading expert. We use the investment opinion to quantitatively analyze the impact of the herd behaviour, the following agent's initial wealth, the excess return, and the volatility of the risky asset on the optimal decision. We validate our analyses through numerical experiments on real stock data. This study is crucial to understanding investors' herd behaviour in decision-making and designing effective mechanisms to guide their decisions. |
| نوع الوثيقة: | Working Paper |
| URL الوصول: | http://arxiv.org/abs/2401.07183 |
| رقم الأكسشن: | edsarx.2401.07183 |
| قاعدة البيانات: | arXiv |
| الوصف غير متاح. |