Statistics Seminar（2014-01）

Topic:Portfolio Choice with Market Closure and Implications for Liquidity Premia

Speaker:Min Dai, National University of Singapore

Time:Thursday, 2 January, 14:00-15:30

Location:Room 217, Guanghua Building 2

Abstract：Most existing portfolio choice models ignore the prevalent periodic market closure and the fact that market volatility is significantly higher during trading periods. We find that market closure and the volatility difference across trading and nontrading periods significantly change optimal trading strategies. In addition, we show that transaction costs can have a first order effect on liquidity premia that is largely comparable to empirical findings. In addition, the higher liquidity premium is Not from higher trading frequency, but mainly from the substantially “suboptimal” trading strategy. In supportive of the importance of the volatility difference across trading and nontrading periods, our empirical analysis finds that the greater this difference the higher the liquidity premia. This work is jointly with Peifan Li, Hong Liu, and Yajun Wang.

About the speaker：Min Dai received his Ph.D. degree from Fudan University in 2000. He worked as a post-doc and lecturer at the School of Mathematical Sciences, Peking University for four years after his graduation. He joined the Department of Mathematics, National University of Singapore, in 2004, and was promoted to full professor in 2013. His research focuses on mathematical finance and economics, particularly on option pricing and portfolio selection with market imperfections. He has a number of publications in the mathematical finance and economics journals, including Journal of Economic Theory, Mathematical Finance, Journal of Economic Dynamics and Control, etc. Currently he is in the Editorial Boards of Journal of Economic Dynamics and Control and Asia-Pacific Journal of Operational Research.