Optimal Investment Decisions When Time Horizon is Uncertain

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


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.
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

Lionel Martellini discussed ageing population: goal-based investing and its application to the retirement problem
- 10-07-2018
Lionel Martellini, Professor of Finance at EDHEC Business School and Director of EDHEC-...
EDHECInfra Days: Infrastructure Investors need proper benchmarks
- 05-07-2018
Earlier this month we held the first EDHECinfra Days event in London, bringing together...
EDHEC Family Business Centre Dissemin’Actions
- 05-07-2018
Since the beginning of 2018, researchers and teachers from the Family Business Centre...
Editorial Partnership between Les Echos Solutions and the EDHEC Family Business Centre
- 05-07-2018
On the June 20, 2018, the Family Business Centre made its first contribution at the...