A portfolio rebalancing model with self-finance strategy and consideration of V-shaped transaction cost is presented in this paper. Our main contribution is that a new constraint is introduced to confirm that the rebalance necessity of the existing portfolio needs to be adjusted. The constraint is constructed by considering both the transaction amount and transaction cost without any additional supply to the investment amount. The V-shaped transaction cost function is used to calculate the transaction cost of the portfolio, and conditional value at risk (CVaR) is used to measure the risk of the portfolios. Computational tests on practical financial data show that the proposed model is effective and the rebalanced portfolio increases the expected return of the portfolio and reduces the CVaR risk of the portfolio.
In the literature, there is a wide range of discounts associated with foreclosures. Comparisons across studies are difficult as they use different methodologies across large areas over different time periods. We employ a consistent methodology across space and time. We find modest discounts, within the range of typical transaction costs, in all but the highest priced market segment. Higher priced segments could explain prior findings of substantial discounts. We find that discounts are time-varying, with discounts increasing with market distress. A one-size-fits-all approach is not appropriate when estimating distressed transaction discounts across large market areas or under changing market conditions.
This research builds on a widely-cited study to prove that the permissible tax loss deduction subsidizes investments in volatile securities by materially lowering the required expected return on more volatile assets. The implications of the theory are robust to the existence of transaction costs, dividends, forced liquidations, and a ceiling on capital loss deductions in some countries. It is further shown that special tax treatment at death significantly increases the value of the tax deduction option. The theoretical model is explained to be consistent with empirical findings reported in the literature and to actually help explain some asset pricing anomalies.
A New Portfolio Rebalancing Model with Transaction Costs