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Growth-Optimal Strategies with Quadratic Friction Over Finite-Time Investment Horizons

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  • E. Aurell
  • P. Muratore-Ginanneschi

Abstract

We investigate the growth optimal strategy over a finite time horizon for a stock and bond portfolio in an analytically solvable multiplicative Markovian market model. We show that the optimal strategy consists in holding the amount of capital invested in stocks within an interval around an ideal optimal investment. The size of the holding interval is determined by the intensity of the transaction costs and the time horizon.

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  • E. Aurell & P. Muratore-Ginanneschi, 2002. "Growth-Optimal Strategies with Quadratic Friction Over Finite-Time Investment Horizons," Papers cond-mat/0211044, arXiv.org.
    • Handle: RePEc:arx:papers:cond-mat/0211044
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    References listed on IDEAS

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    1. Sergei Maslov & Yi-Cheng Zhang, 1998. "Optimal Investment Strategy for Risky Assets," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 1(03), pages 377-387.
    2. Sergei Maslov & Yi-Cheng Zhang, 1998. "Optimal Investment Strategy for Risky Assets," Papers cond-mat/9801240, arXiv.org.
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