Optimal Dynamic Portfolio Selection: Multiperiod Mean‐Variance Formulation

Duan Li and Wan‐Lung Ng

Mathematical Finance, 2000, vol. 10, issue 3, 387-406

Abstract: The mean‐variance formulation by Markowitz in the 1950s paved a foundation for modern portfolio selection analysis in a single period. This paper considers an analytical optimal solution to the mean‐variance formulation in multiperiod portfolio selection. Specifically, analytical optimal portfolio policy and analytical expression of the mean‐variance efficient frontier are derived in this paper for the multiperiod mean‐variance formulation. An efficient algorithm is also proposed for finding an optimal portfolio policy to maximize a utility function of the expected value and the variance of the terminal wealth.

Date: 2000
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