Optimal portfolio policies with borrowing and shortsale constraints

We characterize optimal intertemporal portfolio policies for investors with CRRA utility facing either a borrowing constraint, or shortsale restrictions, or both. The optimal constrained portfolios are identified as optimal unconstrained portfolios for a higher riskless rate, or for a subset of the...

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Bibliographic Details
Published inJournal of economic dynamics & control Vol. 24; no. 11; pp. 1623 - 1639
Main Author Tepla, Lucie
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.10.2000
Elsevier
Elsevier Sequoia S.A
SeriesJournal of Economic Dynamics and Control
Subjects
Borrowing
Borrowing constraints
Economic models
Economic theory
Financial economics
Investment
Investment policy
Modelling
Optimal investment
Optimization
Portfolio management
Portfolio selection
Short sales
Shortsale constraints
Studies
Values
Borrowing constraints
Optimal investment
Shortsale constraints
G11
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Summary:We characterize optimal intertemporal portfolio policies for investors with CRRA utility facing either a borrowing constraint, or shortsale restrictions, or both. The optimal constrained portfolios are identified as optimal unconstrained portfolios for a higher riskless rate, or for a subset of the risky assets, or for a combination of the two settings. Our characterization is based on duality results in Cvitanić and Karatzas (1992, Annals of Applied Probability 2, 767–818) for optimal portfolio investment when portfolio values are more generally constrained to a closed, convex, nonempty subset of R n.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0165-1889
1879-1743
DOI:10.1016/S0165-1889(99)00089-5