Portfolio Selection in a Lognormal Market When the Investor Has a Power Utility Function

James Ohlson and W. T. Ziemba

Journal of Financial and Quantitative Analysis, 1976, vol. 11, issue 1, 57-71

Abstract: Multiasset portfolio selection models stated in terms of the expected utility criterion generally require the evaluation of multiple integrals. This reality has severely hindered attempts towards the development of computation methods to determine optimal portfolio allocations when there are a large number of assets. Aside from special cases, expected utility is not convergent into a simple closed form; the complexity from the point of view of computation is then perhaps most easily appreciated if one realizes that every iteration in a nonlinear program demands the estimation of several integrals (see Ziemba [23] for details). Such calculations are extremely costly when the number of assets is large. It is, consequently, of interest to approximate the expected utility function by a function which is easier to optimize over the set of feasible portfolios.

Date: 1976
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:11:y:1976:i:01:p:57-71_02

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().