Abstract

http://ssrn.com/abstract=594845
 
 

References (16)



 
 

Citations (11)



 


 



Dynamic Trading Strategies and Portfolio Choice


Ravi Bansal


Duke University and NBER

Campbell R. Harvey


Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Magnus Dahlquist


Stockholm School of Economics

September 23, 2004



Abstract:     
Traditional mean-variance efficient portfolios do not capture the potential wealth creation opportunities provided by predictability of asset returns. We propose a simple method for constructing optimally managed portfolios that exploits the possibility that asset returns are predictable. We implement these portfolios in both single and multi-period horizon settings. We compare alternative portfolio strategies which include both buy-and-hold and fixed weight portfolios. We find that managed portfolios can significantly improve the mean-variance trade-off, in particular, for investors with investment horizons of three to five years. Also, in contrast to popular advice, we show that the buy-and-hold strategy should be avoided.

Number of Pages in PDF File: 27

Keywords: Dynamic strategies, mean-variance optimization, multiperiod choice, efficient frontier, buy-and-hold investment

JEL Classification: G11, G12

working papers series





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Date posted: September 24, 2004  

Suggested Citation

Bansal, Ravi and Harvey, Campbell R. and Dahlquist, Magnus, Dynamic Trading Strategies and Portfolio Choice (September 23, 2004). Available at SSRN: http://ssrn.com/abstract=594845 or http://dx.doi.org/10.2139/ssrn.594845

Contact Information

Ravi Bansal
Duke University and NBER ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7758 (Phone)
919-660-8038 (Fax)
Campbell R. Harvey (Contact Author)
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Magnus Dahlquist
Stockholm School of Economics ( email )
Drottninggatan 98
Stockholm, SE-111 60
Sweden
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