On the Computation of Optimal Monotone Mean-Variance Portfolios via Truncated Quadratic Utility
Journal of Mathematical Economics 48(6), 386-395, 2012
11 Pages Posted: 11 Oct 2008 Last revised: 22 Jun 2020
Date Written: August 1, 2011
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
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