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Time-Consistent Strategies for a Multiperiod Mean-Variance Portfolio Selection Problem

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  • Huiling Wu

Abstract

It remained prevalent in the past years to obtain the precommitment strategies for Markowitz's mean-variance portfolio optimization problems, but not much is known about their time-consistent strategies. This paper takes a step to investigate the time-consistent Nash equilibrium strategies for a multiperiod mean-variance portfolio selection problem. Under the assumption that the risk aversion is, respectively, a constant and a function of current wealth level, we obtain the explicit expressions for the time-consistent Nash equilibrium strategy and the equilibrium value function. Many interesting properties of the time-consistent results are identified through numerical sensitivity analysis and by comparing them with the classical pre-commitment solutions.

Suggested Citation

  • Huiling Wu, 2013. "Time-Consistent Strategies for a Multiperiod Mean-Variance Portfolio Selection Problem," Journal of Applied Mathematics, Hindawi, vol. 2013, pages 1-13, April.
    • Handle: RePEc:hin:jnljam:841627
    DOI: 10.1155/2013/841627
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    Cited by:

    1. Aditya Maheshwari & Traian Pirvu, 2019. "Portfolio Optimization under Correlation Constraint," Papers 1912.12521, arXiv.org.
    2. Aditya Maheshwari & Traian A. Pirvu, 2020. "Portfolio Optimization under Correlation Constraint," Risks, MDPI, vol. 8(1), pages 1-18, February.
    3. Esben Kryger & Maj-Britt Nordfang & Mogens Steffensen, 2020. "Optimal control of an objective functional with non-linearity between the conditional expectations: solutions to a class of time-inconsistent portfolio problems," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 91(3), pages 405-438, June.

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