Horizon-unbiased Investment with Ambiguity
Mathematical Finance
2019-04-23 v1
Abstract
In the presence of ambiguity on the driving force of market randomness, we consider the dynamic portfolio choice without any predetermined investment horizon. The investment criteria is formulated as a robust forward performance process, reflecting an investor's dynamic preference. We show that the market risk premium and the utility risk premium jointly determine the investors' trading direction and the worst-case scenarios of the risky asset's mean return and volatility. The closed-form formulas for the optimal investment strategies are given in the special settings of the CRRA preference.
Keywords
Cite
@article{arxiv.1904.09379,
title = {Horizon-unbiased Investment with Ambiguity},
author = {Qian Lin and Xianming Sun and Chao Zhou},
journal= {arXiv preprint arXiv:1904.09379},
year = {2019}
}