On the Computation of Optimal Monotone Mean-Variance Portfolios via Truncated Quadratic Utility

11 Pages Posted: 11 Oct 2008 Last revised: 15 Aug 2012

See all articles by Aleš Černý

Aleš Černý

Cass Business School, City, University of London

Fabio Maccheroni

Bocconi University - Department of Decision Sciences

Massimo Marinacci

University of Turin - Department of Statistics and Applied Mathematics

Aldo Rustichini

University of Minnesota - Twin Cities - Department of Economics

Date Written: August 1, 2011

Abstract

We report a surprising link between optimal portfolios generated by a special type of variational preferences called divergence preferences (cf. Maccheroni et al. 2006) and optimal portfolios generated by classical expected utility. As a special case we connect optimization of truncated quadratic utility (cf. Cerny 2003) to the optimal monotone mean-variance portfolios (cf. Maccheroni et al.2007), thus simplifying the computation of the latter.

Keywords: optimal portfolio, truncated quadratic utility, monotone mean-variance preferences, divergence preferences, HARA utility

JEL Classification: G11, D81, C61

Suggested Citation

Černý, Aleš and Maccheroni, Fabio and Marinacci, Massimo and Rustichini, Aldo, On the Computation of Optimal Monotone Mean-Variance Portfolios via Truncated Quadratic Utility (August 1, 2011). Cass Business School Research Paper Series. Available at SSRN: https://ssrn.com/abstract=1278623 or http://dx.doi.org/10.2139/ssrn.1278623

Aleš Černý (Contact Author)

Cass Business School, City, University of London ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Fabio Maccheroni

Bocconi University - Department of Decision Sciences ( email )

Via Roentgen 1
Milan, 20136
Italy

Massimo Marinacci

University of Turin - Department of Statistics and Applied Mathematics ( email )

Piazza Arbarello 8
Turin, I-10122
Italy

HOME PAGE: http://web.econ.unito.it/gma/massimo.htm

Aldo Rustichini

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States

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