Optimal multi-period mean–variance policy under no-shorting constraint

Xiangyu Cui, Jianjun Gao, Xun Li and Duan Li

European Journal of Operational Research, 2014, vol. 234, issue 2, 459-468

Abstract: We consider in this paper the mean–variance formulation in multi-period portfolio selection under no-shorting constraint. Recognizing the structure of a piecewise quadratic value function, we prove that the optimal portfolio policy is piecewise linear with respect to the current wealth level, and derive the semi-analytical expression of the piecewise quadratic value function. One prominent feature of our findings is the identification of a deterministic time-varying threshold for the wealth process and its implications for market settings. We also generalize our results in the mean–variance formulation to utility maximization with no-shorting constraint.

Keywords: Multi-period portfolio selection; Multi-period mean–variance formulation; Expected utility maximization; No-shorting (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:234:y:2014:i:2:p:459-468

DOI: 10.1016/j.ejor.2013.02.040

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