2011/01/06 by Winston Buckley, Buckley, Winston, Garfield Brown +4
Economics, Econometrics and Finance · #Complex Systems and Time Series Analysis #FOS: Economics and business #Financial Markets and Investment Strategies #General Finance (q-fin.GN) #Portfolio Management (q-fin.PM) #Pricing of Securities (q-fin.PR) #Stochastic processes and financial applications #q-fin.GN #q-fin.PM #q-fin.PR
paper · pdf · doi:10.48550/arxiv.1101.1148
arxiv created 2011/01/06 · openalex publication_date 2011/01/06 · arxiv updated 2011/01/07 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We extend the theory of asymmetric information in mispricing models for stocks following geometric Brownian motion to constant relative risk averse investors. Mispricing follows a continuous mean--reverting Ornstein--Uhlenbeck process. Optimal portfolios and maximum expected log--linear utilities from terminal wealth for informed and uninformed investors are derived. We obtain analogous but more general results which nests those of Guasoni (2006) as a special case of the relative risk aversion approaching one.