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Long term optimal investment in matrix valued factor models

Robertson, Scott and Xing, Hao (2017) Long term optimal investment in matrix valued factor models. SIAM Journal on Financial Mathematics, 8 (1). pp. 400-434. ISSN 1945-497X

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Identification Number: 10.1137/15M1030625

Abstract

Long horizon optimal investment problems are studied in a factor model with matrix valued state variables. Explicit parameter restrictions are obtained under which, for an isoelastic investor, the finite horizon value function and optimal strategy converge to their long-run counterparts as the investment horizon approaches infinity. Additionally, portfolio turnpikes are obtained in which finite horizon optimal strategies for general utility functions converge to the long-run optimal strategy for isoelastic utility. By using results on large time behavior of semi-linear partial differential equations, our analysis extends, to a non-affine setting, affine models where the Wishart process drives investment opportunities.

Item Type: Article
Official URL: http://epubs.siam.org/journal/sjfmbj
Additional Information: © 2017 Society for Industrial and Applied Mathematics
Divisions: Statistics
Subjects: H Social Sciences > HA Statistics
Q Science > QA Mathematics
Sets: Departments > Statistics
Date Deposited: 17 Feb 2017 13:50
Last Modified: 20 Jun 2019 02:35
Projects: DMS-1312419
Funders: National Science Foundation
URI: http://eprints.lse.ac.uk/id/eprint/69520

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