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Portfolio optimization with KOSPI200 and House price index

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Title
Portfolio optimization with KOSPI200 and House price index
Author
Cho, Minky
Advisor
Choi, Jin Hyuk
Issue Date
2020-02
Publisher
Graduate School of UNIST
Abstract
In this paper, we will investigate optimal investment and consumption strategies in the market with CRRA utility function. In this market, the investor chooses a portfolio that consists of one bond (with zero interest rates), one illiquid risky asset (having transaction costs), and one liquid risky asset (having no transaction costs). Using shadow price which is the virtual price between the bid and ask price, we can derive the optimal investment and consumption strategies. From these results we obtained, we will apply to the market having stock and residential real estate. For the analyze, we chose KOSPI200 (the index consists of 200 big companies of the Stock Market Division in Korea) for the stock and house price index (the price of the residential real estate in Korea) for the real estate. With KOSPI200 and house price index data, we obtained the optimal investment and consumption strategies and also checked the effect of the transaction costs on two risky assets and consumption.
Description
Department of Mathematical Sciences
URI
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MTH_Theses_Master
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