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Portfolio Selection with Little Information about the Future

Author

Listed:
  • Klaus Hellwig

    (Faculty of Mathematics and Economics, University of Ulm)

Abstract

In multiperiod portfolio selection one faces the problem of choosing a proper multiperiod utility function, to determine the planning horizon and the number of future opportunities as well as the financial consequences of these opportunities. In this paper an alternative approach is proposed where the initial portfolio value is required to follow some given growth pattern. Following this approach it is shown that under reasonable assumptions a solution can be found that requires neither a utility function nor information about the planning horizon, the required growth rates, the number of future opportunities or the financial consequences of these opportunities.

Suggested Citation

  • Klaus Hellwig, 2005. "Portfolio Selection with Little Information about the Future," Annals of Economics and Finance, Society for AEF, vol. 6(2), pages 331-335, November.
    • Handle: RePEc:cuf:journl:y:2005:v:6:i:2:p:331-335
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    References listed on IDEAS

    as
    1. Speckbacher, Gerhard, 1998. "Maintaining capital intact and WARP," Mathematical Social Sciences, Elsevier, vol. 36(2), pages 145-155, September.
    2. Ralf Korn, 1998. "Value preserving portfolio strategies and the minimal martingale measure," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 47(2), pages 169-179, June.
    3. Ralf Korn, 2000. "Value Preserving Strategies and a General Framework for Local Approaches to Optimal Portfolios," Mathematical Finance, Wiley Blackwell, vol. 10(2), pages 227-241, April.
    4. Hellwig, Klaus, 2002. "Growth and utility maximization," Economics Letters, Elsevier, vol. 77(3), pages 377-380, November.
    5. Ralf Korn & Manfred Schäl, 1999. "On value preserving and growth optimal portfolios," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 50(2), pages 189-218, October.
    6. Hellwig, Klaus, 2004. "Portfolio selection subject to growth objectives," Journal of Economic Dynamics and Control, Elsevier, vol. 28(10), pages 2119-2128, September.
    7. Hellwig, K. & Speckbacher, G. & Wentges, P., 2000. "Utility maximization under capital growth constraints," Journal of Mathematical Economics, Elsevier, vol. 33(1), pages 1-12, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Multiperiod; Portfolio; Selection;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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