The Grossman and Zhou investment strategy is not always optimal
(2005) In Statistics and Probability Letters 74(3). p.245-252- Abstract
- Grossman and Zhou [1993. Optimal investment strategies for controlling drawdowns. Math. Finance 3, 241-276] proposed a strategy to maximize the asymptotic long-run growth rate of one's fortune F, subject to its never falling below lambda sup(0 <= t'<= t) F(t')e(r(t-t')), where 0 <=lambda <= 1 is a fixed constant chosen by the investor and r is a fixed, known, non-negative, continuously compounded interest rate on invested capital. In this paper we show that the strategy proposed in Grossman and Zhou does not retain its optimal long-run growth property when generalized to the discrete-time setting.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/223851
- author
- Klass, M J and Nowicki, Krzysztof LU
- organization
- publishing date
- 2005
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- optimal asset allocation, drawdown, portfolio insurance
- in
- Statistics and Probability Letters
- volume
- 74
- issue
- 3
- pages
- 245 - 252
- publisher
- Elsevier
- external identifiers
-
- wos:000231899600003
- scopus:23944473379
- ISSN
- 0167-7152
- DOI
- 10.1016/j.spl.2005.04.060
- language
- English
- LU publication?
- yes
- id
- 37b108be-d2da-4ec8-a331-1b0c7cb46310 (old id 223851)
- date added to LUP
- 2016-04-01 15:46:54
- date last changed
- 2022-04-22 17:22:18
@article{37b108be-d2da-4ec8-a331-1b0c7cb46310, abstract = {{Grossman and Zhou [1993. Optimal investment strategies for controlling drawdowns. Math. Finance 3, 241-276] proposed a strategy to maximize the asymptotic long-run growth rate of one's fortune F, subject to its never falling below lambda sup(0 <= t'<= t) F(t')e(r(t-t')), where 0 <=lambda <= 1 is a fixed constant chosen by the investor and r is a fixed, known, non-negative, continuously compounded interest rate on invested capital. In this paper we show that the strategy proposed in Grossman and Zhou does not retain its optimal long-run growth property when generalized to the discrete-time setting.}}, author = {{Klass, M J and Nowicki, Krzysztof}}, issn = {{0167-7152}}, keywords = {{optimal asset allocation; drawdown; portfolio insurance}}, language = {{eng}}, number = {{3}}, pages = {{245--252}}, publisher = {{Elsevier}}, series = {{Statistics and Probability Letters}}, title = {{The Grossman and Zhou investment strategy is not always optimal}}, url = {{http://dx.doi.org/10.1016/j.spl.2005.04.060}}, doi = {{10.1016/j.spl.2005.04.060}}, volume = {{74}}, year = {{2005}}, }