OPTIMAL CONSTANT-REBALANCED PORTFOLIO INVESTMENT STRATEGIES FOR DYNAMIC PORTFOLIO SELECTION

Zhong-Fei Li (), Kai W. Ng, Ken Seng Tan () and Hailiang Yang ()
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Zhong-Fei Li: Department of Finance, Lingnan (University) College, Sun Yat-Sen University, Guangzhou 510275, People's Republic of China
Kai W. Ng: Department of Statistics and Actuarial Science, The University of Hong Kong, Pokfulam Road, Hong Kong, China
Ken Seng Tan: Department of Statistics and Actuarial Science, University of Waterloo, University Avenue West, Waterloo, Ontario, Canada;
Hailiang Yang: Department of Statistics and Actuarial Science, The University of Hong Kong, Pokfulam Road, Hong Kong, China

International Journal of Theoretical and Applied Finance (IJTAF), 2006, vol. 09, issue 06, 951-966

Abstract: In this paper we propose a variant of the continuous-time Markowitz mean-variance model by incorporating the Earnings-at-Risk measure in the portfolio optimization problem. Under the Black-Scholes framework, we obtain closed-form expressions for the optimal constant-rebalanced portfolio (CRP) investment strategy. We also derive explicitly the corresponding mean-EaR efficient portfolio frontier, which is a generalization of the Markowitz mean-variance efficient frontier.

Keywords: Dynamic portfolio optimization; earnings-at-risk; constant-rebalanced portfolios; Black-Scholes model (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219024906003883

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