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Cui, Xiangyu; Gao, Jianjun; Li, Xun; Li, Duan

Optimal multi-period mean-variance policy under no-shorting constraint. (English) Zbl 1304.91185

Eur. J. Oper. Res. 234, No. 2, 459-468 (2014).
Summary: We consider in this paper the mean-variance formulation in multi-period portfolio selection under no-shorting constraint. Recognizing the structure of a piecewise quadratic value function, we prove that the optimal portfolio policy is piecewise linear with respect to the current wealth level, and derive the semi-analytical expression of the piecewise quadratic value function. One prominent feature of our findings is the identification of a deterministic time-varying threshold for the wealth process and its implications for market settings. We also generalize our results in the mean-variance formulation to utility maximization with no-shorting constraint.

Cited in 49 Documents

MSC:

91G10 Portfolio theory

Keywords:

multi-period portfolio selection; multi-period mean-variance formulation; expected utility maximization; no-shorting
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References:

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