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A Goal Seeking Investment Model

Author

Listed:
  • K. O. Cogger

    (University of Kansas)

  • O. M. Joy

    (University of Kansas)

  • W. Ruland

    (Baruch College)

  • P. L. Yu

    (University of Kansas)

Abstract

A probabilistic investment model is formulated as a Wiener process with a barrier. A planning horizon, targeted rate of return, discount rate, and the mean and variance rate of return are the important parameters in the model. Sensitivity analyses are studied. Several significant statements can be made: (1) contrary to traditional mean-variance portfolio models, rate of return variance may not always be an undesirable characteristic, since higher variance can increase the chances of achieving certain types of investment goals; (2) one can almost always achieve certain types of investment goals if the time horizon is sufficiently long.

Suggested Citation

  • K. O. Cogger & O. M. Joy & W. Ruland & P. L. Yu, 1983. "A Goal Seeking Investment Model," Management Science, INFORMS, vol. 29(9), pages 1027-1036, September.
  • Handle: RePEc:inm:ormnsc:v:29:y:1983:i:9:p:1027-1036
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    File URL: http://dx.doi.org/10.1287/mnsc.29.9.1027
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    Citations

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    Cited by:

    1. Dohi, T. & Tanaka, H. & Kaio, N. & Osaki, S., 1995. "Alternative growth versus security in continuous dynamic trading," European Journal of Operational Research, Elsevier, vol. 84(2), pages 265-278, July.
    2. Aguilar, Francisco X. & Cai, Zhen, 2010. "Exploratory analysis of prospects for renewable energy private investment in the U.S," Energy Economics, Elsevier, vol. 32(6), pages 1245-1252, November.
    3. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.

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