Portfolio Turnpikes

Posted: 9 Sep 1998

See all articles by Philip H. Dybvig

Philip H. Dybvig

Washington University in St. Louis - John M. Olin Business School

L. C. G. Rogers

University of Cambridge - Centre for Mathematical Sciences

Kerry Back

Rice University - Jesse H. Jones Graduate School of Business

Abstract

Portfolio turnpike theorems show that if preferences at large wealth levels are similar to power utility, then the investment strategy converges to the power utility strategy as the horizon increases. We state and prove two simple and general portfolio turnpike theorems. Unlike existing literature, our main result does not assume independence of returns and depends only on discounting of future cash flows. We also provide a critique of portfolio turnpike results, based on the observations that (1) the time required for convergence is often too large to be relevant, and (2) there is no convergence for consumption withdrawal problems.

JEL Classification: G11, G12

Suggested Citation

Dybvig, Philip H. and Rogers, L. C. G. (Chris) and Back, Kerry, Portfolio Turnpikes. Available at SSRN: https://ssrn.com/abstract=122829

Philip H. Dybvig (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

L. C. G. (Chris) Rogers

University of Cambridge - Centre for Mathematical Sciences ( email )

Cambridge, CB3 9DD
United Kingdom

Kerry Back

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

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