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Title: | Equilibrium strategy for a multi-period weighted mean-variance portfolio selection in a Markov regime-switching market with uncertain time-horizon and a stochastic cash flow | Authors: | Ge, H Li, X Li, X Li, Z |
Issue Date: | 2023 | Source: | Communications in statistics. Theory and methods, 2023, v. 52, no. 6, p. 1797-1832 | Abstract: | This article considers a multi-period weighted mean-variance portfolio selection problem with uncertain time-horizon and a stochastic cash flow in a Markov regime-switching market. The random returns of risky assets and amount of the cash flow all depend on the states of a stochastic market which are assumed to follow a discrete-time Markov chain. Based on the conditional distribution of uncertain time-horizon caused by exogenous factors, we construct a more general mean-variance investment model. Within a game theoretic framework, we derive the equilibrium strategy and equilibrium value function in closed-form by applying backward induction approach. In addition, we show the equilibrium efficient frontier and discuss some degenerate cases. Finally, some numerical examples and sensitivity analysis are presented to illustrate equilibrium efficient frontiers and the effects of uncertain time-horizon on the equilibrium strategy and equilibrium efficient frontier as well as regime-switching and stochastic cash flow on the equilibrium efficient frontier. | Keywords: | Equilibrium efficient frontier Equilibrium strategy Markov regime-switching Multi-period weighted mean-variance portfolio selection Stochastic cash flow Uncertain time-horizon |
Publisher: | Marcel Dekker | Journal: | Communications in statistics. Theory and methods | ISSN: | 0361-0926 | DOI: | 10.1080/03610926.2021.1939379 | Rights: | © 2021 Taylor & Francis Group, LLC This is an Accepted Manuscript of an article published by Taylor & Francis in Communications in Statistics - Theory and Methods on 25 Aug 2021 (Published online), available online: http://www.tandfonline.com/10.1080/03610926.2021.1939379. |
Appears in Collections: | Journal/Magazine Article |
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Li_Equilibrium_Strategy_Multi-Period.pdf | Pre-Published version | 402.64 kB | Adobe PDF | View/Open |
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