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Time-consistent strategies for multi-period mean-variance portfolio optimization with the serially correlated returns

Author

Listed:
  • Helu Xiao
  • Zhongbao Zhou
  • Tiantian Ren

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Yanfei Bai
  • Wenbin Liu

Abstract

In this paper, we discuss several different styles of multi-period mean-variance portfolio optimization problems under the serially correlated returns. We derive the time-consistent strategies for the classical multi-period mean-variance optimization with and without risk-free asset using a backward induction approach. We also propose an alternative multi-period mean-variance model, and the corresponding time-consistent strategies are derived. Whereafter, we provide some portfolio evaluation indexes and perform extensive empirical studies based on real data, aiming to provide useful advice for investors. To a large extent, the empirical results answer one important and practical question: in actual investment situations, which strategy is preferred by different investors?

Suggested Citation

  • Helu Xiao & Zhongbao Zhou & Tiantian Ren & Yanfei Bai & Wenbin Liu, 2020. "Time-consistent strategies for multi-period mean-variance portfolio optimization with the serially correlated returns," Post-Print hal-03281772, HAL.
    • Handle: RePEc:hal:journl:hal-03281772
    DOI: 10.1080/03610926.2019.1636999
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