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Growth-Security Investment Strategy for Long and Short Runs

Author

Listed:
  • Yuming Li

    (School of Business Administration and Economics, California State University, Fullerton, Fullerton, California 92634-9480)

Abstract

It is well known that the investment policy maximizing the expected logarithm of wealth each period is a long-run optimal capital growth criterion. However, the growth-optimal strategy entails a considerable risk of losing a substantial portion of wealth for the investment in the short run. This paper extends the long-run capital growth criterion to a multiperiod investment policy which maximizes the capital growth and at the same time achieves a given probability of maintaining an accumulated risk-free return over any finite investment horizon.

Suggested Citation

  • Yuming Li, 1993. "Growth-Security Investment Strategy for Long and Short Runs," Management Science, INFORMS, vol. 39(8), pages 915-924, August.
    • Handle: RePEc:inm:ormnsc:v:39:y:1993:i:8:p:915-924
    DOI: 10.1287/mnsc.39.8.915
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    Cited by:

    1. Yiannis Kamarianakis & Anastasios Xepapadeas, 2006. "Controlling the risky fraction process with an ergodic criterion," Working Papers 0710, University of Crete, Department of Economics.
    2. Chung-Han Hsieh, 2022. "On Solving Robust Log-Optimal Portfolio: A Supporting Hyperplane Approximation Approach," Papers 2202.03858, arXiv.org.
    3. Gao, Jianwei, 2008. "Stochastic optimal control of DC pension funds," Insurance: Mathematics and Economics, Elsevier, vol. 42(3), pages 1159-1164, June.
    4. David J. Johnstone, 2007. "The Parimutuel Kelly Probability Scoring Rule," Decision Analysis, INFORMS, vol. 4(2), pages 66-75, June.
    5. Grant, Andrew & Johnstone, David, 2010. "Finding profitable forecast combinations using probability scoring rules," International Journal of Forecasting, Elsevier, vol. 26(3), pages 498-510, July.
    6. Joseph B. Kadane, 2011. "Partial-Kelly Strategies and Expected Utility: Small-Edge Asymptotics," Decision Analysis, INFORMS, vol. 8(1), pages 4-9, March.
    7. Blomvall, Jorgen & Lindberg, Per Olov, 2003. "Back-testing the performance of an actively managed option portfolio at the Swedish Stock Market, 1990-1999," Journal of Economic Dynamics and Control, Elsevier, vol. 27(6), pages 1099-1112, April.
    8. David Johnstone & Stewart Jones & Oliver Jones & Steve Tulig, 2021. "Scoring Probability Forecasts by a User’s Bets Against a Market Consensus," Decision Analysis, INFORMS, vol. 18(3), pages 169-184, September.

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