Long term optimal investment with regime switching: inflation, information and short sales.
Financial models are based on the standard assumptions of frictionless markets, complete information, no transaction costs and no taxes and borrowing and short selling without restrictions. Short-selling bans around the world after the global financial crisis and in several exchanges during the COVID 19 period, become more and more important. This paper bridges the gap by providing for the first time in the literature a model that accounting explicitly and simultaneously for inflation, information costs and short sales in the portfolio performance with regime switching. Our model can be used by portfolio managers to assess the impact of these market imperfections on portfolio decisions.
['Bellalah|Mondher|M|', 'Hakim|Akeb|A|', 'Si|Kehan|K|', 'Zhang|Detao|D|0000-0002-8056-9605']
Regime switching Information costs Inflation rate Short selling costs