Efficiency of Dynamic Portfolio Choices: An Experiment

Jacopo Magnani, Jean Paul Rabanal (), Olga A Rud and Yabin Wang

The Review of Financial Studies, 2022, vol. 35, issue 3, 1279-1309

Abstract: We study the efficiency of dynamic portfolio choices using the nonparametric methods of Dybvig (1988) and Post (2003). We compare a dynamic portfolio task against an equivalent static Arrow-Debreu problem under two alternative environments: (1) nonpooled withterminal states and (2) pooled withunique terminal states. The results suggest that, within each environment, efficiency is lower in a static format and when the number of final states is larger. In the nonpooled dynamic task, which allows for path dependent strategies, we find that a form of stop-loss strategy drives efficiency losses.

JEL-codes: C91 D81 G11 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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