ASYMPTOTICALLY OPTIMAL PORTFOLIOS

Farshid Jamshidian

Mathematical Finance, 1992, vol. 2, issue 2, 131-150

Abstract: This paper extends to continuous time the concept of universal portfolio introduced by Cover (1991). Being a performance weighted average of constant rebalanced portfolios, the universal portfolio outperforms constant rebalanced and buy‐and‐hold portfolios exponentially over the long run. an asymptotic formula summarizing its long‐term performance is reported that supplements the one given by Cover. A criterion in terms of long‐term averages of instantaneous stock drifts and covariances is found which determines the particular form of the asymptotic growth. A formula for the expected universal wealth is given.

Date: 1992
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