In this paper, a link between a time-consistent and a pre-commitment investment strategy is established. We define an implied investment target, which is implicitly contained in a time-consistent strategy at a given time step and wealth level. By imposing the implied investment target at the...

While cointegration models with constant parameters generate statistical arbitrage, the cointegration feature may change and even disappear due to regime shifts. This paper studies the time-consistent mean-variance portfolio problem in a Markov-modulated regime switching cointegration economy....

We formulate the multi-period, time consistent mean-CVAR (Conditional Value at Risk) asset allocation problem in a form amenable to numerical computation. Our numerical algorithm can impose realistic constraints such as: no shorting, no-leverage, and discrete rebalancing. We focus on long term...

We consider dynamic sublinear expectations (i.e., time-consistent coherent risk measures) whose scenario sets consist of singular measures corresponding to a general form of volatility uncertainty. We derive a càdlàg nonlinear martingale which is also the value process of a superhedging...

We study portfolio choice in a Black-Scholes world under drift uncertainty. Preferences towards risk and ambiguity are modeled using the smooth ambiguity approach under a double power utility assumption and a normal distribution assumption on the unknown drift. Optimal investment in this setting...

This paper studies how hyperbolic discounting affects stock market participation, asset allocation, and saving decisions over the life cycle in an economy with Epstein-Zin preferences. Hyperbolic discounting affects saving and portfolio decisions through at least two channels: (1) it lowers...

We investigate a discrete-time mean-risk portfolio selection problem, where risk is measured by the conditional value-at-risk (CVaR). By embedding this time-inconsistent problem into a family of expected utility maximization problems with a piecewise linear utility function, we solve the problem...

We solve for the time consistent dynamic asset allocation of an investor with a mean variance objective function in a multiple assets affine setting. We use as a benchmark the pre-commitment strategy widely used in the literature and assess the potential welfare gains from pre-commitment by...

When we implement a portfolio selection methodology under a mean-risk formulation, it is essential to correctly model investors' risk aversion which may be time-dependent, or even state-dependent during the investment procedure. In this paper, we propose a behavior risk aversion model, which is...