Optimal portfolios with asymptotic criteria |
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| Authors: | Hiroshi Konno Stanley R. Pliska Ken-Ichi Suzuki |
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| Affiliation: | (1) Institute of Human and Social Science, Tokyo Institute of Technology, 2-12-1 Oh-Okayama, Meguro-ku, 152 Tokyo, Japan;(2) Department of Finance, University of Illinois at Chicago, 60616 Chicago, IL, USA;(3) Department of Social Engineering, Tokyo Institute of Technology, 2-12-1 Oh-Okayama, Meguro-ku, 152 Tokyo, Japan |
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| Abstract: | This paper is concerned with a portfolio optimization model for a long planning horizon. We first argue that in this case the asymptotic growth rate and the asymptotic variance are better measures of performance than the usual mean and variance of return. We next propose an efficient algorithm for calculating the asymptotic frontier, i.e., the efficient frontier relative to the new criteria. Finally, we illustrate our methods and compare the difference between our model and the classical mean-variance-model by using historical data based on the 1064 stocks of the Tokyo Stock Exchange. |
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| Keywords: | Asymptotic growth rate asymptotic variance portfolio optimization mean-variance model |
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