A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability

Détails

ID Serval
serval:BIB_5EC9EFA1BA2D
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Titre
A Simulation Approach to Dynamic Portfolio Choice with an Application to Learning About Return Predictability
Périodique
Review of Financial Studies
Auteur(s)
Brandt  M. W., Goyal  A., Santa-Clara  P., Stroud  J. R.
ISSN
0893-9454
Statut éditorial
Publié
Date de publication
2005
Peer-reviewed
Oui
Volume
18
Numéro
3
Pages
831-873
Langue
anglais
Résumé
We present a simulation-based method for solving discrete-time portfolio choice problems involving non-standard preferences, a large number of assets with arbitrary return distribution, and, most importantly, a large number of state variables with potentially path-dependent or non-stationary dynamics. The method is flexible enough to accommodate intermediate consumption, portfolio constraints, parameter and model uncertainty, and learning. We first establish the properties of the method for the portfolio choice between a stock index and cash when the stock returns are either iid or predictable by the dividend yield. We then explore the problem of an investor who takes into account the predictability of returns but is uncertain about the parameters of the data generating process. The investor chooses the portfolio anticipating that future data realizations will contain useful information to learn about the true parameter values.
Mots-clé
Strategic asset allocation, mean-variance, optimal consumption, constrained optimization, incomplete information, complete markets, selection, investment, utility, model
Web of science
Création de la notice
07/07/2009 14:41
Dernière modification de la notice
20/08/2019 15:16
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