Related papers: Abstract, Classic, and Explicit Turnpikes
Turnpike theorems state that if an investor's utility is asymptotically equivalent to a power utility, then the optimal investment strategy converges to the CRRA strategy as the investment horizon tends to infinity. This paper aims to…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
In this paper we aim to address two questions faced by a long-term investor with a power-type utility at high levels of wealth: one is whether the turnpike property still holds for a general utility that is not necessarily differentiable or…
The \emph{turnpike property} in contemporary macroeconomics asserts that if an economic planner seeks to move an economy from one level of capital to another, then the most efficient path, as long as the planner has enough time, is to…
Motivated by recent axiomatic developments, we study the risk- and ambiguity-averse investment problem where trading takes place over a fixed finite horizon and terminal payoffs are evaluated according to a criterion defined in terms of a…
Obtaining utility maximizing optimal portfolios in closed form is a challenging issue when the return vector follows a more general distribution than the normal one. In this note, we give closed form expressions, in markets based on…
In this paper the turnpike property is established for a non-convex optimal control problem in discrete time. The functional is defined by the notion of the ideal convergence and can be considered as an analogue of the terminal functional…
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
This paper derives a portfolio decomposition formula when the agent maximizes utility of her wealth at some finite planning horizon. The financial market is complete and consists of multiple risky assets (stocks) plus a risk free asset. The…
We consider a single-period portfolio selection problem for an investor, maximizing the expected ratio of the portfolio utility and the utility of a best asset taken in hindsight. The decision rules are based on the history of stock returns…
The turnpike principle is a fundamental concept in optimal control theory, stating that for a wide class of long-horizon optimal control problems, the optimal trajectory spends most of its time near a steady-state solution (the…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
This work is concerned with a hierarchical framework of optimal control problems connecting interacting particle systems, the mean field limit equations, and associated hydrodynamic models. By assuming the existence of solutions, we…
When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a…
The turnpike property refers to the phenomenon that in many optimal control problems, the solutions for different initial conditions and varying horizons approach a neighborhood of a specific steady state, then stay in this neighborhood for…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
This paper analyzes the limiting behavior of stochastic linear-quadratic optimal control problems in finite time horizon $[0,T]$ as $T\rightarrow\infty$. The so-called turnpike properties are established for such problems, under…
In the context of stochastic portfolio theory we introduce a novel class of portfolios which we call linear path-functional portfolios. These are portfolios which are determined by certain transformations of linear functions of a…
Consider a family of portfolio strategies with the aim of achieving the asymptotic growth rate of the best one. The idea behind Cover's universal portfolio is to build a wealth-weighted average which can be viewed as a buy-and-hold…
We introduce a pathwise approach to analyze the relative performance of an equity portfolio with respect to a benchmark market portfolio. In this energy-entropy framework, the relative performance is decomposed into three components: a…