Growth-security investment strategy for long and short runs

Growth-security investment strategy for long and short runs

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Article ID: iaor1994843
Country: United States
Volume: 39
Issue: 8
Start Page Number: 915
End Page Number: 924
Publication Date: Aug 1993
Journal: Management Science
Authors:
Keywords: growth
Abstract:

It is well known that the investment policy maximizing the expected logarithm of wealth each period is a long-run optimal capital growth criterion. However, the growth-optimal strategy entails a considerable risk of losing a substantial portion of wealth for the investment in the short run. This paper extends the long-run capital growth criterion to a multiperiod investment policy which maximizes the capital growth and at the same time achieves a given probability of maintaining an accumulated risk-free return over any finite investment horizon.

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