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November 2006 Continuous-time mean-variance efficiency: the 80% rule
Xun Li, Xun Yu Zhou
Ann. Appl. Probab. 16(4): 1751-1763 (November 2006). DOI: 10.1214/105051606000000349

Abstract

This paper studies a continuous-time market where an agent, having specified an investment horizon and a targeted terminal mean return, seeks to minimize the variance of the return. The optimal portfolio of such a problem is called mean-variance efficient à la Markowitz. It is shown that, when the market coefficients are deterministic functions of time, a mean-variance efficient portfolio realizes the (discounted) targeted return on or before the terminal date with a probability greater than 0.8072. This number is universal irrespective of the market parameters, the targeted return and the length of the investment horizon.

Citation

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Xun Li. Xun Yu Zhou. "Continuous-time mean-variance efficiency: the 80% rule." Ann. Appl. Probab. 16 (4) 1751 - 1763, November 2006. https://doi.org/10.1214/105051606000000349

Information

Published: November 2006
First available in Project Euclid: 17 January 2007

zbMATH: 1132.91472
MathSciNet: MR2288703
Digital Object Identifier: 10.1214/105051606000000349

Subjects:
Primary: 90A09
Secondary: 93E20

Keywords: continuous time , goal-achieving , hitting time , mean-variance efficiency , portfolio selection

Rights: Copyright © 2006 Institute of Mathematical Statistics

Vol.16 • No. 4 • November 2006
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