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Universal Investment In Markets With Transaction Costs

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  • Garud Iyengar

Abstract

In this paper we investigate growth optimal investment in two‐asset discrete‐time markets with proportional transaction costs and no distributional assumptions on the market return sequences. We construct a policy with growth rate at least as large as any interval policy. Since interval policies are ε‐optimal for independent and identically distributed (i.i.d.) markets (Iyengar 2002), it follows that our policy when employed in an i.i.d. market is able to “learn” the optimal interval policy and achieve growth optimality; in other words, it is a universal growth optimal policy for i.i.d. markets.

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  • Garud Iyengar, 2005. "Universal Investment In Markets With Transaction Costs," Mathematical Finance, Wiley Blackwell, vol. 15(2), pages 359-371, April.
    • Handle: RePEc:bla:mathfi:v:15:y:2005:i:2:p:359-371
    DOI: 10.1111/j.0960-1627.2005.00223.x
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    Cited by:

    1. Sait Tunc & Suleyman S. Kozat, 2012. "Optimal Investment Under Transaction Costs: A Threshold Rebalanced Portfolio Approach," Papers 1203.4156, arXiv.org.
    2. Bin Li & Steven C. H. Hoi, 2012. "Online Portfolio Selection: A Survey," Papers 1212.2129, arXiv.org, revised May 2013.
    3. Wael Bahsoun & Igor V. Evstigneev & Michael I. Taksar, 2009. "Growth-optimal investments and numeraire portfolios under transaction costs: An analysis based on the von Neumann-Gale model," Papers 0909.4730, arXiv.org.
    4. E. Babaei & I.V. Evstigneev & K.R. Schenk-Hoppé & M.V. Zhitlukhin, 2018. "Von Neumann-Gale Dynamics, Market Frictions, and Capital Growth," Economics Discussion Paper Series 1816, Economics, The University of Manchester.
    5. Jan Palczewski & Lukasz Stettner, 2007. "Growth-optimal portfolios under transaction costs," Papers 0707.3198, arXiv.org.

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