EconPapers    
Economics at your fingertips  
 

Risk-Constrained Dynamic Active Portfolio Management

Sid Browne

Chapter 26 in The Kelly Capital Growth Investment Criterion:Theory and Practice, 2011, pp 373-384 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Active portfolio management is concerned with objectives related to the outperformance of the return of a target benchmark portfolio. In this paper, we consider a dynamic active portfolio management problem where the objective is related to the tradeoff between the achievement of performance goals and the risk of a shortfall. Specifically, we consider an objective that relates the probability of achieving a given performance objective to the time it takes to achieve the objective. This allows a new direct quantitative analysis of the risk/return tradeoff, with risk defined directly in terms of probability of shortfall relative to the benchmark, and return defined in terms of the expected time to reach investment goals relative to the benchmark. The resulting optimal policy is a state-dependent policy that provides new insights. As a special case, our analysis includes the case where the investor wants to minimize the expected time until a given performance goal is reached subject to a constraint on the shortfall probability.

Keywords: Kelly Criterion; Dynamic Investment Analysis; Capital Growth Theory; Sports Betting; Hedge Fund Strategies; Speculative Investing; Fortune 's Formula (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789814293501_0026 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789814293501_0026 (text/html)
Ebook Access is available upon purchase.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:wschap:9789814293501_0026

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().

 
Page updated 2025-04-02
Handle: RePEc:wsi:wschap:9789814293501_0026