Time-consistent investment policies in Markovian markets : A case of mean – variance analysis

@inproceedings{Chen2015TimeconsistentIP,
  title={Time-consistent investment policies in Markovian markets : A case of mean – variance analysis},
  author={Zhiping Chen and Gang Li and Yonggan Zhao},
  year={2015}
}
The optimal investment policy for a standard multi-period mean–variance model is not time-consistent because the variance operator is not separable in the sense of the dynamic programming principle. With a nested conditional expectation mapping, we develop an investment model with time consistency in Markovian markets. Furthermore, we examine the differences of the investment policies with a riskless asset from those without a riskless asset. Analytical solutions for time-consistent optimal… CONTINUE READING