A Dynamic Mean-Variance Analysis for Log Returns

Author: 

Dai, M
Jin, H
Kou, S
Xu, Y

Publication Date: 

20 May 2020

Journal: 

Management Science

Last Updated: 

2021-06-12T19:45:45.467+01:00

Volume: 

N/A

DOI: 

10.1287/mnsc.2019.3493

page: 

N/A-N/A

abstract: 

We propose a dynamic portfolio choice model with the mean-variance criterion for log-returns. The model yields time-consistent portfolio policies and is analytically tractable even under some incomplete market settings. The portfolio policies conform with conventional investment wisdom (e.g. richer people should invest more absolute amount of money in risky assets; the longer investment time horizon, the more proportional amount of money should be invested in risky assets; and for long-term investment, people should not short sell major stock indices whose returns are higher than the risk-free rate), and the model provides a direct link with the CRRA utility maximization in a complete market.

Symplectic id: 

1081281

Download URL: 

Submitted to ORA: 

Submitted

Publication Type: 

Journal Article