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Dynamic Portfolio Choice with Linear Rebalancing Rules


Ciamac C. Moallemi


Columbia Business School - Decision Risk and Operations

Mehmet Saglam


Princeton University - Bendheim Center for Finance
January 1, 2012


Abstract:     
We consider a broad class of dynamic portfolio optimization problems that allow for complex models of return predictability, transaction costs, trading constraints, and risk considerations. Determining an optimal policy in this general setting is almost always intractable. We propose a class of linear rebalancing rules, and describe an efficient computational procedure to optimize with this class. We illustrate this method in the context of portfolio execution, and show that it achieves near optimal performance.

Number of Pages in PDF File: 41

Keywords: Portfolio Choice, Transaction Costs, Return Predictability, Portfolio Execution

JEL Classification: G11

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Date posted: February 27, 2012  

Suggested Citation

Moallemi, Ciamac C. and Saglam, Mehmet, Dynamic Portfolio Choice with Linear Rebalancing Rules (January 1, 2012). Available at SSRN: http://ssrn.com/abstract=2011605 or http://dx.doi.org/10.2139/ssrn.2011605

Contact Information

Ciamac C. Moallemi
Columbia Business School - Decision Risk and Operations ( email )
New York, NY
United States
HOME PAGE: http://moallemi.com/ciamac

Mehmet Saglam (Contact Author)
Princeton University - Bendheim Center for Finance ( email )
26 Prospect Avenue
Princeton, NJ 08540
United States
HOME PAGE: http://www.princeton.edu/~msaglam
Feedback to SSRN (Beta)


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