Arbeitspapier
A multi-period portfolio selection in a large financial market
This paper addresses a multi-period portfolio selection problem when the number of assets in the financial market is large. Using an exponential utility function, the optimal solution is shown to be a function of the inverse of the covariance matrix of asset returns. Nonetheless, when the number of assets grows, this inverse becomes unreliable, yielding a selected portfolio that is far from the optimal one. We propose two solutions to this problem. First, we penalize the norm of the portfolio weights in the dynamic problem and show that the selected strategy is asymptotically efficient. Second, we penalize the norm of the difference of successive portfolio weights in the dynamic problem to guarantee that the optimal portfolio composition does not fluctuate widely between periods. This second method helps investors to avoid high trading costs in the financial market by selecting stable strategies over time. Extensive simulations and empirical results confirm that our procedures considerably improve the performance of the dynamic portfolio.
- Sprache
-
Englisch
- Erschienen in
-
Series: Queen’s Economics Department Working Paper ; No. 1439
- Klassifikation
-
Wirtschaft
Portfolio Choice; Investment Decisions
Model Evaluation, Validation, and Selection
- Thema
-
Dynamic portfolio selection
Large Market
Asymptotic efficiency
Regularization
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Koné, N'Golo
- Ereignis
-
Veröffentlichung
- (wer)
-
Queen's University, Department of Economics
- (wo)
-
Kingston (Ontario)
- (wann)
-
2020
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Koné, N'Golo
- Queen's University, Department of Economics
Entstanden
- 2020
Ähnliche Objekte (12)
Multi-period credit portfolio selection
Multi-period credit portfolio selection
Multi-period project portfolio selection under risk considerations and stochastic income
Variable selection and inference for multi-period forecasting problems
Multi-period portfolio optimization with investor views under regime switching
Multi-period disassembly planning
A general framework for portfolio theory, part III, multi-period markets and modular approach
A General Framework for Portfolio Theory : Part III: Multi-Period Markets and Modular Approach
Dynamic Multi-Period Routing With Two Classes
Capital allocation in credit portfolios in a multi-period setting: a literature review and practical guidelines
On single- and multi-period corporate default prediction
Multi-period investment strategies under cumulative prospect theory
Multi-period credit portfolio selection
Multi-period credit portfolio selection
Multi-period project portfolio selection under risk considerations and stochastic income
Variable selection and inference for multi-period forecasting problems
Multi-period portfolio optimization with investor views under regime switching
Multi-period disassembly planning
A general framework for portfolio theory, part III, multi-period markets and modular approach
A General Framework for Portfolio Theory : Part III: Multi-Period Markets and Modular Approach
Dynamic Multi-Period Routing With Two Classes
Capital allocation in credit portfolios in a multi-period setting: a literature review and practical guidelines
On single- and multi-period corporate default prediction
Multi-period investment strategies under cumulative prospect theory
Multi-period credit portfolio selection
Multi-period credit portfolio selection
Multi-period project portfolio selection under risk considerations and stochastic income
Variable selection and inference for multi-period forecasting problems
Multi-period portfolio optimization with investor views under regime switching
Multi-period disassembly planning
A general framework for portfolio theory, part III, multi-period markets and modular approach
A General Framework for Portfolio Theory : Part III: Multi-Period Markets and Modular Approach
Dynamic Multi-Period Routing With Two Classes
Capital allocation in credit portfolios in a multi-period setting: a literature review and practical guidelines
On single- and multi-period corporate default prediction