Mathematics – Optimization and Control
Scientific paper
2003-04-11
International Journal of Theoretical and Applied Finance, 2003, 6, 593-604
Mathematics
Optimization and Control
22 pages, 5 figures, forthcoming in International Journal of Theoretical and Applied Finance (IJTAF)
Scientific paper
Assume (1) asset returns follow a stochastic multi-factor process with time-varying conditional expectations; (2) investments are linear functions of factors. This paper calculates asymptotic joint moments of the logarithm of investor's wealth and the factors. These formulas enable fast computation of a wide range of investment criteria. The results are illustrated by a numerical example that shows that the optimal portfolio rules are sensitive to the specification of the investment criterion.
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