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A Dynamic Mean-Variance Analysis for Log Returns

Min Dai, Hanqing Jin, Steven Kou, Yuhong XuManagement创新管理UTD24
Management Science2020-05-20National University of Singapore; University of Oxford; Boston University; Soochow UniversityDOI
Citations79

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 amounts of money in risky assets; the longer the 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 constant relative risk aversion utility maximization in a complete market. This paper was accepted by Kay Giesecke, finance.

EconomicsPortfolioEconometricsMaximizationStock (firearms)Variance (accounting)Investment (military)Risk aversion (psychology)Utility maximizationStock marketTime horizonFinancial economics
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