Corpus ID: 208077012

An approximate solution for the power utility optimization under predictable returns

@article{Ivasiuk2019AnAS,
  title={An approximate solution for the power utility optimization under predictable returns},
  author={Dmytro Ivasiuk},
  journal={arXiv: Portfolio Management},
  year={2019}
}
  • Dmytro Ivasiuk
  • Published 2019
  • Economics, Mathematics
  • arXiv: Portfolio Management
This work presents an approximate solution of the portfolio choice problem for the investor with a power utility function and the predictable returns. Assuming that asset returns follow the vector autoregressive process with the normally distributed error terms (what is a popular choice in financial literature to model the return path) it comes up with the fact that portfolio gross returns appear to be normally distributed as a linear combination of normal variables. As it was shown, the log… Expand

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