Normal view MARC view ISBD view

Monte Carlo Method for Optimal Portfolios

By:

Detemple Jerome B

Contributor(s):

Garcia Rene

Material type: Article

ArticleLanguage: ENG Series: ; 58Publication details: Journal of Finance Feb 2003 0Edition: 1Description: 401-446 ppSubject(s):

Interest Rate, Optimal Portfolios

DDC classification:

Det/Gar

Online resources:

Click here to access online

Summary: This paper proposes a new simulation-based approach for optimal portfolio allocation in realistic environments with complex dynamics for the state variables and large numbers of factors and assets. A first illustration involves a choice between equity and cash with nonlinear interest rate and market price of risk dynamics. Intertemporal hedging demands significantly increase the demand for stocks and exhibit low volatility. We then analyze settings where stock returns are also predicted by dividend yields and where investors have wealth-dependent relative risk aversion. Large-scale problems with many assets, including the Nasdaq, SP500, bonds, and cash, are also examined.

Tags from this library: No tags from this library for this title. Log in to add tags.

Average rating: 0.0 (0 votes)

Holdings
Item type	Current library	Call number	Status	Date due	Barcode
Articles	Main Library	Det/Gar (Browse shelf(Opens below))	Available		AR5666

Browsing Main Library shelves Close shelf browser (Hides shelf browser)

Previous	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	Next
Previous	Des/Sah Role of Dynamic Capability and Information Technology in Customer Relationship Management : A Study of Indian Companies	Det Foreign Banks in Poor Countries : Theory and Evidence	DET Logical Thinking Process	Det/Gar Monte Carlo Method for Optimal Portfolios	Deu Building the Global Bank : An Interview with Jamie Dimon	Dev New Challenges	Dev Retort Pouch Packaging of Fish Products	Next

This paper proposes a new simulation-based approach for optimal portfolio allocation in realistic environments with complex dynamics for the state variables and large numbers of factors and assets. A first illustration involves a choice between equity and cash with nonlinear interest rate and market price of risk dynamics. Intertemporal hedging demands significantly increase the demand for stocks and exhibit low volatility. We then analyze settings where stock returns are also predicted by dividend yields and where investors have wealth-dependent relative risk aversion. Large-scale problems with many assets, including the Nasdaq, SP500, bonds, and cash, are also examined.

There are no comments on this title.

to post a comment.