Portfolio Selection under the Condition of Value Preservation

Klaus Hellwig

Review of Quantitative Finance and Accounting, 1996, vol. 7, issue 3, 299-305

Abstract: Besides risk and return, investors often are interested in choosing a portfolio such that the portfolio value is preserved. However, the traditional utility-maximizing approach generally fails to provide such a solution. As a different approach value preservation is formulated as an equilibrium problem. Following this approach it is shown that under reasonable assumptions a value preserving solution exists. The solution only depends on the set of feasible portfolio decisions. Contrary to this, the Bernoulli principle in addition requires a utility function that is independent from this set. Copyright 1996 by Kluwer Academic Publishers

Date: 1996
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