On the exact solution of the multi-period portfolio choice problem for an exponential utility under return predictability

@article{Bodnar2015OnTE,
  title={On the exact solution of the multi-period portfolio choice problem for an exponential utility under return predictability},
  author={Taras Bodnar and Nestor Parolya and Wolfgang Schmid},
  journal={European Journal of Operational Research},
  year={2015},
  volume={246},
  pages={528-542}
}
In this paper we derive the exact solution of the multi-period portfolio choice problem for an exponential utility function under return predictability. It is assumed that the asset returns depend on predictable variables and that the joint random process of the asset returns and the predictable variables follow a vector autoregressive process. We prove that the optimal portfolio weights depend on the covariance matrices of the next two periods and the conditional mean vector of the next period… CONTINUE READING
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