On the computation of optimal monotone mean-variance portfolios via truncated quadratic utility

Aleš Černý, Fabio Maccheroni, Massimo Marinacci, Aldo Rustichini

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Abstract

We report a surprising link between optimal portfolios generated by a special type of variational preferences called divergence preferences (see Maccheroni etal., 2006) and optimal portfolios generated by classical expected utility. As a special case, we connect optimization of truncated quadratic utility (see Černý, 2003) to the optimal monotone mean-variance portfolios (see Maccheroni etal., 2009), thus simplifying the computation of the latter.

Original languageEnglish (US)
Pages (from-to)386-395
Number of pages10
JournalJournal of Mathematical Economics
Volume48
Issue number6
DOIs
StatePublished - Dec 1 2012

Keywords

  • Divergence preferences
  • HARA utility
  • Monotone hull
  • Monotone mean-variance preferences
  • Optimal portfolio
  • Translation-invariant hull
  • Truncated quadratic utility

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