Continuous time mean variance asset allocation: A time-consistent strategy

Continuous time mean variance asset allocation: A time-consistent strategy

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Article ID: iaor20108340
Volume: 209
Issue: 2
Start Page Number: 184
End Page Number: 201
Publication Date: Mar 2011
Journal: European Journal of Operational Research
Authors: ,
Keywords: finance & banking
Abstract:

We develop a numerical scheme for determining the optimal asset allocation strategy for time-consistent, continuous time, mean variance optimization. Any type of constraint can be applied to the investment policy. The optimal policies for time-consistent and pre-commitment strategies are compared. When realistic constraints are applied, the efficient frontiers for the pre-commitment and time-consistent strategies are similar, but the optimal investment strategies are quite different.

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