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A Multi-Period Mean-Variance Portfolio Selection Problem

Author

Listed:
  • Oswaldo Luiz do Valle Costa

    (Escola Politécnica da Universidade de São Paulo (USP))

  • Rodrigo de Barros Nabholz

Abstract

In a recent paper, Li and Ng (2000) considered the multi-period mean variance optimization problem, with investing horizon T, for the case in which only the final variance Var(V(T)) or expected value of the portfolio E(V(T)) are considered in the optimization problem. In this paper we extend their results to the case in which the intermediate expected values E(V(t)) and variances Var(V(t)) for t = 1,,T can also be taken into account in the optimization problem. The main advantage of this technique is that it is possible to control the intermediate behavior of the portfolios return or variance. An example illustrating this situation is presented.

Suggested Citation

  • Oswaldo Luiz do Valle Costa & Rodrigo de Barros Nabholz, 2005. "A Multi-Period Mean-Variance Portfolio Selection Problem," Brazilian Review of Finance, Brazilian Society of Finance, vol. 3(1), pages 101-121.
    • Handle: RePEc:brf:journl:v:3:y:2005:i:1:p:101-121
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    References listed on IDEAS

    as
    1. Duan Li & Wan‐Lung Ng, 2000. "Optimal Dynamic Portfolio Selection: Multiperiod Mean‐Variance Formulation," Mathematical Finance, Wiley Blackwell, vol. 10(3), pages 387-406, July.
    2. Rudolf, Markus & Wolter, Hans-Jurgen & Zimmermann, Heinz, 1999. "A linear model for tracking error minimization," Journal of Banking & Finance, Elsevier, vol. 23(1), pages 85-103, January.
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    More about this item

    Keywords

    portoflio choice; multi-peiord optimization; mean variance analysis;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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