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Optimal Dynamic Portfolio Selection: Multiperiod Mean-Variance Formulation

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  • Duan Li
  • Wan-Lung Ng

Abstract

The mean-variance formulation by Markowitz in the 1950s paved a foundation for modern portfolio selection analysis in a single period. This paper considers an analytical optimal solution to the mean-variance formulation in multiperiod portfolio selection. Specifically, analytical optimal portfolio policy and analytical expression of the mean-variance efficient frontier are derived in this paper for the multiperiod mean-variance formulation. An efficient algorithm is also proposed for finding an optimal portfolio policy to maximize a utility function of the expected value and the variance of the terminal wealth. Copyright Blackwell Publishers Inc. 2000.

Suggested Citation

  • Duan Li & Wan-Lung Ng, 2000. "Optimal Dynamic Portfolio Selection: Multiperiod Mean-Variance Formulation," Mathematical Finance, Wiley Blackwell, vol. 10(3), pages 387-406.
  • Handle: RePEc:bla:mathfi:v:10:y:2000:i:3:p:387-406
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