Dynamic portfolio selection by augmenting the asset space

Published

Journal Article

We present a novel approach to dynamic portfolio selection that is as easy to implement as the static Markowitz paradigm. We expand the set of assets to include mechanically managed portfolios and optimize statically in this extended asset space. We consider "conditional" portfolios, which invest in each asset an amount proportional to conditioning variables, and "timing" portfolios, which invest in each asset for a single period and in the risk-free asset for all other periods. The static choice of these managed portfolios represents a dynamic strategy that closely approximates the optimal dynamic strategy for horizons up to 5 years.

Full Text

Duke Authors

Cited Authors

  • Brandt, MW; Santa-Clara, P

Published Date

  • October 1, 2006

Published In

Volume / Issue

  • 61 / 5

Start / End Page

  • 2187 - 2217

Electronic International Standard Serial Number (EISSN)

  • 1540-6261

International Standard Serial Number (ISSN)

  • 0022-1082

Digital Object Identifier (DOI)

  • 10.1111/j.1540-6261.2006.01055.x

Citation Source

  • Scopus