Time-consistent strategies for multi-period mean-variance portfolio optimization with the serially correlated returns

Helu Xiao, Zhongbao Zhou, Tiantian Ren, Yanfei Bai and Wenbin Liu

Communications in Statistics - Theory and Methods, 2020, vol. 49, issue 12, 2831-2868

Abstract: In this paper, we discuss several different styles of multi-period mean-variance portfolio optimization problems under the serially correlated returns. We derive the time-consistent strategies for the classical multi-period mean-variance optimization with and without risk-free asset using a backward induction approach. We also propose an alternative multi-period mean-variance model, and the corresponding time-consistent strategies are derived. Whereafter, we provide some portfolio evaluation indexes and perform extensive empirical studies based on real data, aiming to provide useful advice for investors. To a large extent, the empirical results answer one important and practical question: in actual investment situations, which strategy is preferred by different investors?

Date: 2020
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DOI: 10.1080/03610926.2019.1636999

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