Robust Portfolio Choices and Asset Holdings
Optimal portfolio rules are derived under uncertainty aversion by formulating the portfolio choice problem as a robust control problem. Using a constant relative risk aversion (CRRA) utility function, we present the solution of the robust portfolio choice problem in the cases of one and two risky assets. For the two risky assets and one risk-free asset case, we show that under uncertainty aversion and when volatility of the one asset is substantially high than that of the other, the total holdings of risky assets as a proportion of the investor's wealth could increase as compared to the holdings under the Merton rule, which is the standard risk aversion case. This result indicates a more aggressive behaviour under risk aversion and robust control policies, which goes against the general beliefs, but which agrees with more recent findings.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 8 (2005)
Issue (Month): 1 (Summer)
|Contact details of provider:|| Web page: http://www.ekonomia.ucy.ac.cy/|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ekn:ekonom:v:8:y:2005:i:1:p:1-20. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Managing Editor)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.