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In the first place the behavior of (online) traders on markets is analyzed and modeled, and it is shown that the average investor behaves as a mean-variance optimizer in finance. Within this description, transaction costs play a key role in explaining observed investment patterns and in particular an important uncovered relation between average investment and portfolio value. As online investors take into account transaction costs in their investment strategy, they are also sensitive to high portfolio rebalancing costs. Solutions to avoid high portfolio turnovers are investigated: first in the one-dimensional case, where it is shown that estimators with minimal-dispersion improve both the accuracy and the variance of volatility and Value-at-Risk forecasts; se...

Despite the availability of very detailed data on financial markets, agent-based modeling is hindered by the lack of information about real trader behavior. This makes it impossible to validate agent-based models, which are thus reverse-engineering attempts. This work is a contribution towards building a set of stylized facts about the traders themselves. Using the client database of Swissquote Bank SA, the largest online Swiss broker, we find empirical relationships between turnover, account values and the number of assets in which a trader is invested. A theory based on simple mean-variance portfolio optimization that crucially includes variable transaction costs is able to reproduce faithfully the observed behaviors. We finally argue that our results bring to light the collective ability of a population to construct a mean-variance ...