Optimal Investment Decisions When Time Horizon is Uncertain

Many investors do not know with certainty when their portfolio will be liquidated.

Author(s) :

Christophette Blanchet-Scalliet

Université de Nice-Sophia Antipolis

Nicole El Karoui

Ecole Polytechnique

Monique Jeanblanc

Université d'Evry Val d'Essonne

Lionel Martellini

Professor of Finance and Scientific Director of the EDHEC Riskand Asset Management Research Centre

Should their portfolio selection be influenced by the uncertainty of exit time? In order to answer this question, we consider a suitable extension of the familiar optimal investment problem of Merton (1971), where we allow the conditional distribution function of an agent's time horizon to be stochastic and correlated to returns on risky securities. In contrast to existing literature, which has focused on an independent time horizon, we show that the portfolio decision is affected.
Pdf
Optimal Investment Decisions When Time Horizon is Uncertain...
(-1.00 B)
Type : Working paper
Date : le 07/05/2007
Extra information : Pour plus d'informations, nous vous prions de vous adresser à Joanne Finlay, Direction de la recherche de l'EDHEC [ joanne.finlay@edhec.edu ] Les opinions exprimées sont celles des auteurs et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

See Also

New EDHEC survey on equity factor investing calls risk techniques into question
News
- 23-01-2018
In a new survey conducted among investment professionals between June and September...
Governance and Emotions at the Interface in the Family Business
News
- 12-01-2018
The Academy of Management (AOM), founded in 1936 in the United States, organizes its...
Interview with Julia Milner, PhD, new Academic Director of the Global MBA programme
News
- 11-01-2018
The Global MBA programme has a new Academic Director! Professor Julia Milner, PhD, has...
To sell or not to sell?
News
- 11-01-2018
Dr. Fabian Bernhard has been actively involved in the EDHEC Family Business Centre...