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Liquidity as a Decision Criterion

Abstract

Considerations in the former chapters concentrated mainly on the definition of liquidity, methods of its appropriate description, and its measurement. Yet, the main reason why investors are concerned with this issue is its relevance for investment decisions. Since liquidity is one of the standard investment targets, ignoring it will most probably result in a suboptimal allocation of capital. Despite this fact, the vast majority of the existing investment analysis and decision tools skip on this issue narrowing the scope of admissible assets to those considered to be perfectly liquid. Obviously, this is inappropriate for a wide range of assets including real estate. This drawback is dealt with in this Chapter.

Keywords

Optimal Portfolio Portfolio Selection Reservation Price Stochastic Dominance Efficient Frontier 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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