WINE SPECTATOR'S RATINGS FLASH OUR NEWEST WINE …newsletters.winespectator.com/images/Ratingssample.pdf · France BURGUNDY 3 TOP SCORERS PIERRE DAMOY Chambertin-Clos de Bèze 201
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Dynamic Optimization of Asset Allocation Strategies under Downside Risk Control: An Application to Futures Markets Rainer A. Schüssler Helmut Schmidt University March 2016 Abstract We introduce a novel out-of-sample approach to solve a real-time investors mul- tiperiod portfolio choice problem in a setting with (time-varying) conditional predictabil- ity, multiple assets and downside risk control. The method involves dening a discrete set of one-period portfolio allocation policies and choosing among them at portfolio revision dates within a discrete-time stochastic dynamic programming approach so as to maxim- ize an investors expected utility. Our framing of the portfolio problem overcomes the curse of dimensionality that is associated with time-varying investment opportunity sets and multiple assets. We apply our technique to dynamic investment decision problems in futures markets and demonstrate its feasibility and usefulness. JEL: G11, C61 Keywords: Dynamic portfolio choice; Predictability; Downside risk con- trol; Estimation error; Real-time investor; Futures markets; Bayesian learn- ing Email: [email protected]. Tel.: +49 40 6541 2861. 1
