Inter-Temporal Portfolio Analysis Based on Simulation of Joint Returns

An inter-temporal quadratic programming model for selecting portfolios of risky assets is formulated. The model's application to capital budgeting is discussed in considerable detail. This is followed by briefer discussions of its application in other areas. The paper develops a new and more efficient way of using simulation to calculate the variance-covariance elements required as input to Markowitz-type models; this new procedure makes no further demands on the decision maker than do other simulation models that have been suggested. The paper also shows how such models can be made inter-temporal. Finally, the paper analyzes the potentials for extending such models to include other theoretical considerations that have been proposed in the literature.

• 저널Management Science · 14(1) · 5–18
• 토픽Capital Investment and Risk Analysis · Finance
• DOI10.1287/mnsc.14.1.5
• 저자Kalman J. Cohen, Edwin J. Elton