Long term optimal investment in matrix valued factor models

Scott Robertson and Hao Xing

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Long horizon optimal investment problems are studied in a factor model with matrix valued state variables. Explicit parameter restrictions are obtained under which, for an isoelastic investor, the finite horizon value function and optimal strategy converge to their long-run counterparts as the investment horizon approaches infinity. Additionally, portfolio turnpikes are obtained in which finite horizon optimal strategies for general utility functions converge to the long-run optimal strategy for isoelastic utility. By using results on large time behavior of semi-linear partial differential equations, our analysis extends, to a non-affine setting, affine models where the Wishart process drives investment opportunities.

Keywords: Portfolio choice; Long-run; Risk sensitive control; Portfolio turnpike; Wishart process. (search for similar items in EconPapers)
JEL-codes: C1 (search for similar items in EconPapers)
Date: 2017-06-29
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Citations: View citations in EconPapers (4)

Published in SIAM Journal on Financial Mathematics, 29, June, 2017, 8(1), pp. 400-434. ISSN: 1945-497X

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