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- Publisher Website: 10.1080/14697688.2018.1465580
- Scopus: eid_2-s2.0-85048190142
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Article: Dynamic portfolio choice without cash
Title | Dynamic portfolio choice without cash |
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Authors | |
Keywords | Dynamic asset allocation Equilibrium control Mean–variance portfolio selection Time inconsistency |
Issue Date | 2019 |
Publisher | Routledge. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/14697688.asp |
Citation | Quantitative Finance, 2019, v. 19 n. 2, p. 313-326 How to Cite? |
Abstract | We consider the dynamic mean–variance portfolio choice without cash under a game theoretic framework. The mean–variance criterion is investigated in the situation where an investor allocates the wealth among risky assets while keeping no cash in a bank account. The problem is solved explicitly up to solutions of ordinary differential equations by applying the extended Hamilton–Jacobi–Bellman equation system. Given a constant risk aversion coefficient, the optimal allocation without a risk-free asset depends linearly on the current wealth, while that with a risk-free asset turns out to be independent of the current wealth. We also study the minimum-variance criterion, which can be viewed as an extension of the mean–variance model when the risk aversion coefficient tends to infinity. Calibration exercises demonstrate that for large investments, the mean–variance model without cash yields the highest certainty equivalent return for both short-term and long-term investments. Furthermore, the mean–variance portfolio choices with and without cash yield almost the same Sharpe ratio for an investment with large initial wealth. |
Persistent Identifier | http://hdl.handle.net/10722/279514 |
ISSN | 2023 Impact Factor: 1.5 2023 SCImago Journal Rankings: 0.705 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | LAM, CK | - |
dc.contributor.author | Xu, Y | - |
dc.contributor.author | Yin, G | - |
dc.date.accessioned | 2019-11-01T07:18:50Z | - |
dc.date.available | 2019-11-01T07:18:50Z | - |
dc.date.issued | 2019 | - |
dc.identifier.citation | Quantitative Finance, 2019, v. 19 n. 2, p. 313-326 | - |
dc.identifier.issn | 1469-7688 | - |
dc.identifier.uri | http://hdl.handle.net/10722/279514 | - |
dc.description.abstract | We consider the dynamic mean–variance portfolio choice without cash under a game theoretic framework. The mean–variance criterion is investigated in the situation where an investor allocates the wealth among risky assets while keeping no cash in a bank account. The problem is solved explicitly up to solutions of ordinary differential equations by applying the extended Hamilton–Jacobi–Bellman equation system. Given a constant risk aversion coefficient, the optimal allocation without a risk-free asset depends linearly on the current wealth, while that with a risk-free asset turns out to be independent of the current wealth. We also study the minimum-variance criterion, which can be viewed as an extension of the mean–variance model when the risk aversion coefficient tends to infinity. Calibration exercises demonstrate that for large investments, the mean–variance model without cash yields the highest certainty equivalent return for both short-term and long-term investments. Furthermore, the mean–variance portfolio choices with and without cash yield almost the same Sharpe ratio for an investment with large initial wealth. | - |
dc.language | eng | - |
dc.publisher | Routledge. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/14697688.asp | - |
dc.relation.ispartof | Quantitative Finance | - |
dc.rights | Preprint: This is an Author's Original Manuscript of an article published by Taylor & Francis Group in [JOURNAL TITLE] on [date of publication], available online: http://www.tandfonline.com/doi/abs/[Article DOI]. Postprint: This is an Accepted Manuscript of an article published by Taylor & Francis Group in [JOURNAL TITLE] on [date of publication], available online at: http://www.tandfonline.com/doi/abs/[Article DOI]. | - |
dc.subject | Dynamic asset allocation | - |
dc.subject | Equilibrium control | - |
dc.subject | Mean–variance portfolio selection | - |
dc.subject | Time inconsistency | - |
dc.title | Dynamic portfolio choice without cash | - |
dc.type | Article | - |
dc.identifier.email | Yin, G: gyin@hku.hk | - |
dc.identifier.authority | Yin, G=rp00831 | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1080/14697688.2018.1465580 | - |
dc.identifier.scopus | eid_2-s2.0-85048190142 | - |
dc.identifier.hkuros | 308633 | - |
dc.identifier.volume | 19 | - |
dc.identifier.issue | 2 | - |
dc.identifier.spage | 313 | - |
dc.identifier.epage | 326 | - |
dc.identifier.isi | WOS:000456007800010 | - |
dc.publisher.place | United Kingdom | - |
dc.identifier.issnl | 1469-7688 | - |