Abstract, classic, and explicit turnpikes

Paolo Guasoni (), Constantinos Kardaras (), Scott Robertson () and Hao Xing ()

Finance and Stochastics, 2014, vol. 18, issue 1, 75-114

Abstract: Portfolio turnpikes state that as the investment horizon increases, optimal portfolios for generic utilities converge to those of isoelastic utilities. This paper proves three kinds of turnpikes. In a general semimartingale setting, the abstract turnpike states that optimal final payoffs and portfolios converge under their myopic probabilities. In diffusion models with several assets and a single state variable, the classic turnpike demonstrates that optimal portfolios converge under the physical probability. In the same setting, the explicit turnpike identifies the limit of finite-horizon optimal portfolios as a long-run myopic portfolio defined in terms of the solution of an ergodic HJB equation. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Portfolio choice; Incomplete markets; Long-run; Utility functions; Turnpikes; 93E20; 60H30; G11; C61 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s00780-013-0216-5

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