Prof. Peter Swan from the University of New South Wales is giving a VGSF research seminar on "OPTIMAL PORTFOLIO BALANCING UNDER CONVENTIONAL PREFERENCES AND TRANSACTION COSTS EXPLAINS THE EQUITY PREMIUM PUZZLE" on FRIDAY, October 6th, from 15:30 to 17:00 at the WU Wien (UZA 4, Nordbergstrasse 15, 1090 Wien, Room D204, 2. Obergeschoß, see http://www.wu-wien.ac.at/portal/ueber_wu/standorte/lageplan4 for a detailed plan). Please find the paper's abstract below.

Peter is going to be in Vienna on Friday. If you like to meet him and to discuss your research with him, please contact Alex Stomper (stomper@ihs.ac.at).

Best, Michael Halling

Abstract Adding a motivation for trading due to endowment differences to the standard assumptions of asset pricing, we investigate the impact of a variety of impediments to trade including transactions costs and illiquidity due to small participant numbers. We calibrate to observed activity levels, returns, transaction costs and volatility in equity and bond markets to show that equity investors benefit from the ability to trade freely, and thus require a high return of 6 to 8% pa for bearing even modest transactional charges of 0.5%. Our findings are consistent with most empirical facts and explain a number of anomalies in addition to the equity premium puzzle.