Time-Consistent Strategies for a Multiperiod Mean-Variance Portfolio Selection Problem

Huiling Wu

Journal of Applied Mathematics, 2013, vol. 2013, 1-13

Abstract:

It remained prevalent in the past years to obtain the precommitment strategies for Markowitz's mean-variance portfolio optimization problems, but not much is known about their time-consistent strategies. This paper takes a step to investigate the time-consistent Nash equilibrium strategies for a multiperiod mean-variance portfolio selection problem. Under the assumption that the risk aversion is, respectively, a constant and a function of current wealth level, we obtain the explicit expressions for the time-consistent Nash equilibrium strategy and the equilibrium value function. Many interesting properties of the time-consistent results are identified through numerical sensitivity analysis and by comparing them with the classical pre-commitment solutions.

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnljam:841627

DOI: 10.1155/2013/841627

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