On the structure of multifactor optimal portfolio strategies
The paper studies problem of optimal portfolio selection. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can be constructed using a limited number of fixed processes (mutual funds), for a market with a larger number of availabl...
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| Format: | Journal Article |
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EDP Sciences
2017
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| Online Access: | http://hdl.handle.net/20.500.11937/54223 |
| _version_ | 1848759316102774784 |
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| author | Dokuchaev, Nikolai |
| author_facet | Dokuchaev, Nikolai |
| author_sort | Dokuchaev, Nikolai |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | The paper studies problem of optimal portfolio selection. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can be constructed using a limited number of fixed processes (mutual funds), for a market with a larger number of available risky stocks. This implies dimension reduction for the optimal portfolio selection problem: all rational investors may achieve optimality using the same mutual funds plus a saving account. This result is obtained under mild restrictions for the utility functions without any assumptions on regularity of the value function. The proof is based on the method of dynamic programming applied indirectly to some convenient approximations of the original problem that ensure certain regularity of the value functions. To overcome technical difficulties, we use special time dependent and random constraints for admissible strategies such that the corresponding HJB (Hamilton–Jacobi–Bellman) equation admits “almost explicit” solutions generating near optimal admissible strategies featuring sufficient regularity and integrability. |
| first_indexed | 2025-11-14T09:57:56Z |
| format | Journal Article |
| id | curtin-20.500.11937-54223 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T09:57:56Z |
| publishDate | 2017 |
| publisher | EDP Sciences |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-542232019-02-04T03:08:41Z On the structure of multifactor optimal portfolio strategies Dokuchaev, Nikolai The paper studies problem of optimal portfolio selection. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can be constructed using a limited number of fixed processes (mutual funds), for a market with a larger number of available risky stocks. This implies dimension reduction for the optimal portfolio selection problem: all rational investors may achieve optimality using the same mutual funds plus a saving account. This result is obtained under mild restrictions for the utility functions without any assumptions on regularity of the value function. The proof is based on the method of dynamic programming applied indirectly to some convenient approximations of the original problem that ensure certain regularity of the value functions. To overcome technical difficulties, we use special time dependent and random constraints for admissible strategies such that the corresponding HJB (Hamilton–Jacobi–Bellman) equation admits “almost explicit” solutions generating near optimal admissible strategies featuring sufficient regularity and integrability. 2017 Journal Article http://hdl.handle.net/20.500.11937/54223 10.1051/cocv/2017013 EDP Sciences restricted |
| spellingShingle | Dokuchaev, Nikolai On the structure of multifactor optimal portfolio strategies |
| title | On the structure of multifactor optimal portfolio strategies |
| title_full | On the structure of multifactor optimal portfolio strategies |
| title_fullStr | On the structure of multifactor optimal portfolio strategies |
| title_full_unstemmed | On the structure of multifactor optimal portfolio strategies |
| title_short | On the structure of multifactor optimal portfolio strategies |
| title_sort | on the structure of multifactor optimal portfolio strategies |
| url | http://hdl.handle.net/20.500.11937/54223 |