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‘To have what they are having’: portfolio choice for mimicking mean–variance savers

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  • Vasyl Golosnoy
  • Nestor Parolya

Abstract

We consider a group of mean-variance investors with mimicking desire such that each investor is willing to penalize deviations of his portfolio composition from compositions of other group members. Penalizing norm constraints are already applied for statistical improvement of Markowitz portfolio procedure in order to cope with estimation risk. We relate these penalties to individuals' wish of social learning and introduce a mutual fund (investment club) aggregating group member preferences unknown for individual savers. We derive the explicit analytical solution for the fund's optimal portfolio weights and show advantages to invest in such a fund for individuals willing to mimic.
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Suggested Citation

  • Vasyl Golosnoy & Nestor Parolya, 2017. "‘To have what they are having’: portfolio choice for mimicking mean–variance savers," Quantitative Finance, Taylor & Francis Journals, vol. 17(11), pages 1645-1653, November.
    • Handle: RePEc:taf:quantf:v:17:y:2017:i:11:p:1645-1653
    DOI: 10.1080/14697688.2017.1301674
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