Effects of decision interval on optimal intertemporal portfolios with serially correlated returns |
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| Institution: | 1. Department of Economics, West Virginia University, Morgantown, WV 26506-6025, USA;1. Forensic Science Program, FSK, Universiti Kebangsaan Malaysia, Jalan Raja Muda Abdul Aziz, 50300, Kuala Lumpur, Malaysia;2. Statistics Program, FST, Universiti Kebangsaan Malaysia, 43600, Bangi, Selangor, Malaysia;1. School of Materials Science and Engineering, Kunming University of Science and Technology, Kunming 650093, China;2. Department of Structural Materials, Central Iron and Steel Research Institute, Beijing 100081, China;1. Key Laboratory of Ecosystem Network Observation and Modeling, Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing 100101, China;2. Center for Excellence in Tibetan Plateau Earth Sciences, Chinese Academy of Sciences, Beijing 100101, China;3. College of Resources and Environment, University of Chinese Academy of Sciences, Beijing 100190, China;1. Department of Chemical Technology, Faculty of Chemistry, Maria Curie-Sklodowska University, 3 M. Curie-Sklodowska Sq., 20-031, Lublin, Poland;2. Laboratoire de Réactivité de Surface, Sorbonne Université-CNRS, UMR 7197, F-75005, Paris, France;1. School of Materials Science and Engineering, Tianjin University, Tianjin 300354, China;2. Tianjin Key Laboratory of Advanced Joining Technology, Tianjin 300354, China;1. Workgroup for Infrastructure Policy, Technische Universität Berlin, Strasse des 17. Juni 135, 10623 Berlin, Germany;2. Energy, Transport, Environment, DIW Berlin, Mohrenstraße 58, 10117 Berlin, Germany;3. Energy and Environmental Management, Europa Universität Flensburg, Munketoft 3, 24937 Flensburg, Germany;4. Reiner Lemoine Institute, Rudower Chaussee 12, 12489 Berlin, Germany |
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| Abstract: | This paper considers portfolio choice when decisions are made for several future time periods all at once. The risky asset share sequence must be precommitted for the entire decision interval, either constrained (as in Samuelson (1991)) or not constrained (as in Balvers and Mitchell (2000)) to be constant across time periods within the interval. For a broad, plausible class of dynamic returns processes, contrary to Samuelson, under log utility the decisions for the more distant future are more conservative. This class is exemplified by autocorrelated ARMA(p,q) processes and finite-state Markov processes. The source of Samuelson’s contrary result is elucidated. |
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