IDEAS home Printed from https://ideas.repec.org/p/arx/papers/cond-mat-9801240.html
   My bibliography  Save this paper

Optimal Investment Strategy for Risky Assets

Author

Listed:
  • Sergei Maslov
  • Yi-Cheng Zhang

Abstract

We design an optimal strategy for investment in a portfolio of assets subject to a multiplicative Brownian motion. The strategy provides the maximal typical long-term growth rate of investor's capital. We determine the optimal fraction of capital that an investor should keep in risky assets as well as weights of different assets in an optimal portfolio. In this approach both average return and volatility of an asset are relevant indicators determining its optimal weight. Our results are particularly relevant for very risky assets when traditional continuous-time Gaussian portfolio theories are no longer applicable.

Suggested Citation

  • Sergei Maslov & Yi-Cheng Zhang, 1998. "Optimal Investment Strategy for Risky Assets," Papers cond-mat/9801240, arXiv.org.
    • Handle: RePEc:arx:papers:cond-mat/9801240
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/cond-mat/9801240
    File Function: Latest version
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Edward W. Piotrowski, "undated". "Problems with the Astumian's Paradox (in Polish)," Departmental Working Papers 121pl, University of Bialtystok, Department of Theoretical Physics.
    2. J. Emeterio Navarro-Barrientos & Frank E. Walter & Frank Schweitzer, 2008. "Risk-Seeking Versus Risk-Avoiding Investments In Noisy Periodic Environments," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 19(06), pages 971-994.
    3. Navarro-Barrientos, Jesús Emeterio & Cantero-Álvarez, Rubén & Matias Rodrigues, João F. & Schweitzer, Frank, 2008. "Investments in random environments," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(8), pages 2035-2046.
    4. E. Aurell & P. Muratore-Ginanneschi, 2002. "Growth-Optimal Strategies with Quadratic Friction Over Finite-Time Investment Horizons," Papers cond-mat/0211044, arXiv.org.
    5. Paolo Laureti & Matus Medo & Yi-Cheng Zhang, 2010. "Analysis of Kelly-optimal portfolios," Quantitative Finance, Taylor & Francis Journals, vol. 10(7), pages 689-697.
    6. Arpan Jani, 2021. "An agent-based model of repeated decision making under risk: modeling the role of alternate reference points and risk behavior on long-run outcomes," Journal of Business Economics, Springer, vol. 91(9), pages 1271-1297, November.
    7. Chung-Han Hsieh, 2021. "On Asymptotic Log-Optimal Buy-and-Hold Strategy," Papers 2103.04898, arXiv.org.
    8. Erik Aurell & Paolo Muratore-Ginanneschi, 1999. "Financial Friction and Multiplicative Markov Market Game," Papers cond-mat/9908253, arXiv.org.
    9. E. Aurell & R. Baviera & O. Hammarlid & M. Serva & A. Vulpiani, 1998. "A general methodology to price and hedge derivatives in incomplete markets," Papers cond-mat/9810257, arXiv.org, revised Apr 1999.
    10. Subbiah, Mohan & Fabozzi, Frank J., 2016. "Hedge fund allocation: Evaluating parametric and nonparametric forecasts using alternative portfolio construction techniques," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 189-201.
    11. Sornette, Didier, 1998. "Large deviations and portfolio optimization," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 256(1), pages 251-283.
    12. Hendrik J. Blok, 2000. "On the nature of the stock market: Simulations and experiments," Papers cond-mat/0010211, arXiv.org.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:cond-mat/9801240. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.