Alternative optimality criteria of portfolio selection based upon threshold stopping rule

Tadashi Dohi, Eiichi Kitaoka and Shunji Osaki

Applied Stochastic Models and Data Analysis, 1994, vol. 10, issue 4, 257-268

Abstract: This paper proposes two types of alternative criteria of optimality for the continuous time portfolio selection problem. The optimality criteria, the so–called Laplace–Stieltjes transform (LST) criteria, are based on the assumption that the financial agent has a target level for the wealth accumulation process. These criteria are closely related to the so–called threshold stopping investment rule. We analytically derive the LST criteria and numerically compare them with the well–known Kelly criterion. It is shown that the portfolio strategies suggested may overcome the problem that the growth portfolio is often overestimated in several investment situations.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:wly:apsmda:v:10:y:1994:i:4:p:257-268

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