A New Benchmark for Dynamic Mean-Variance Portfolio Allocations

Hugues Langlois
Additional contact information
Hugues Langlois: HEC Paris - Ecole des Hautes Etudes Commerciales

Working Papers from HAL

Abstract: We propose a new methodology to implement unconditionally optimal dynamic mean-variance portfolios. We model portfolio allocations using an auto-regressive process in which the shock to the portfolio allocation is the gradient of the investor's realized certainty equivalent with respect to the allocation. Our methodology can accommodate transaction costs, short-selling and leverage constraints, and a large number of assets. In out-of-sample tests using equity portfolios, long-short factors, government bonds, and commodities, we find that its risk-adjusted performance, net of transaction costs, is on average more than double that of other benchmark allocations.

Keywords: Portfolio Choice; Mean-Variance; Asset Allocation; Estimation Risk (search for similar items in EconPapers)
Date: 2020-07-10
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:hal:wpaper:hal-02896695

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().