We carry out an analytical investigation on the optimal portfolio policy for a multiperiod mean-variance investor facing multiple risky assets. We consider the case with proportional, market impact, and quadratic transaction costs. For proportional transaction costs, we find that a buy-and-hold...

We analyze the optimal portfolio policy for a multiperiod mean-variance investor facing a large number of risky assets in the presence of general transaction cost. For proportional transaction costs, we give a closed-form expression for a no-trade region, shaped as a multi-dimensional...

Multiperiod portfolio choice is the central problem in active asset management. Multiperiod dynamic portfolios are notoriously difficult to solve, especially when there are hundreds of tradable assets as well as a large number of state variables. In this paper, we develop a novel two-step...

We study whether investors can exploit stock return serial dependence to improve out-of- sample portfolio performance. To do this, we first show that a vector-autoregressive (VAR) model estimated with ridge regression captures daily stock return serial dependence in a stable manner. Second, we...

In this paper, we focus on the estimation of a high-dimensional precision matrix. We propose a simple improvement of the graphical lasso framework (glasso) that is able to attain better statistical performance without sacrificing too much the computational cost. The proposed improvement is based...

We carry out a comprehensive investigation of shrinkage estimators for asset allocation, and we find that size matters—the shrinkage intensity plays a significant role in the performance of the resulting estimated optimal portfolios. We study both portfolios computed from shrinkage estimators...