Multistage mean-variance portfolio selection in cointegrated vector autoregressive systems

[摘要] (cont.) In the dynamic setting, the use of inter-temporal hedging enables the investor to further exploit the negative correlation among the inter-stage returns. However, the stochastic parameters of the per-stage asset return distributions prohibit the development of a closed-form solution to the dynamic MVO problem, necessitating the use of Monte Carlo methods. To address the computational limitations of this numerical approximation, a set of four approximate dynamic schemes are considered. Each relaxation is suboptimal, yet admits a tractable solution. The relative performance of these strategies, demonstrated through simulations involving synthetic and real data, depends again on the investment time horizon, the use of leverage and the statistical properties of the inter-stage portfolio returns.

[发布机构] Massachusetts Institute of Technology