A mean-variance frontier in discrete and continuous time
Paul A. Bekker
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Paul A. Bekker: Groningen University
No 200406, CCSO Working Papers from University of Groningen, CCSO Centre for Economic Research
The paper presents a mean-variance frontier based on dynamic frictionless investment strategies in continuous time. The result applies to a finite number of risky assets whose price process is given by multivariate geometric Brownian motion with deterministically varying coefficients. The derivation is based on the solution for the frontier in discrete time. Using the same multiperiod framework as Li and Ng (2000), I provide an alternative derivation and an alternative formulation of the solution. It allows for a nice asymptotic formulation of the efficient hyperbola and its underlying efficient processes that applies in continuous time.
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