On 30th March, 2018, we welcome Prof. Shunming ZHANG to our series lecture on “Economics and Business”, as well as his speech on Limited Participation and Asset Allocation under Ambiguity of Correlation. Shunming ZHANG is a professor at The School of Finance of Renmin University of China, the Winner of National Outstanding Young Science Fund and the Distinguished Professor of Yangtze River Scholar Award Program by Ministry of Education. He has hosted several key projects of National Social Science Fund and National Natural Science Fund. He is mainly engaged in the teaching and research on Economics and Finance. The lecture was hosted by Prof. Ying FAN from School of Economics and Management at Beihang University.
In the following lecture, Prof. Shunming ZHANG has detailed investigated the implication of correlation ambiguity for investors' decision making and limited participation under market equilibrium. His research demonstrates that limited participation arises from the rational decision by sophisticated and naive and noise investors to avoid correlation ambiguity. Comparative static analysis of the equilibrium result suggests that changes in the ambiguity level for sophisticated and naive investors and the fraction of four types of investors can alter equilibrium types and affect equilibrium prices. He also observes flight to quality phenomenon. Under equilibrium, the investors with less information could trade more intensively than the investors with more information in one of the risky assets. During and after the lecture, more than 30 scholars and students from BUAA SEM discussed the key points of the talk with Prof. Zhang, and also raised quite a few relevant questions, which provoke further thinking on the issue from both parties.
