Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/79176 
Year of Publication: 
2005
Series/Report no.: 
Working Paper No. 2004-14
Publisher: 
Rutgers University, Department of Economics, New Brunswick, NJ
Abstract: 
The paper analyzes the intensity of choice in an agent based financial optimization problem. Mean-variance optimizing agents choose among mutual funds of similar styles but varying performance. We specify a model for the allocation of new funds, switching between funds, and withdrawals and obtain statistically significant estimates of the intensity of choice parameter. This estimate is also given economic interpretation through the underperformance of funds that use an active style. We find that agents will move 5% of the funds from active to passive for an extra 28 basis points of return.
Subjects: 
heterogenous agents
intensity of choice
mutual funds
JEL: 
G11
Document Type: 
Working Paper

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