Chen, Jia orcid.org/0000-0002-2791-2486, Li, Degui orcid.org/0000-0001-6802-308X, Linton, Oliver et al. (1 more author) (2016) Semiparametric Dynamic Portfolio Choice with Multiple Conditioning Variables. Journal of Econometrics. pp. 309-318. ISSN 0304-4076
Abstract
Dynamic portfolio choice has been a central and essential objective for investors in active asset management. In this paper, we study the dynamic portfolio choice with multiple conditioning variables, where the dimension of the conditioning variables can be either fixed or diverging to infinity at certain polynomial rate of the sample size. We propose a novel data-driven method to estimate the optimal portfolio choice, motivated by the model averaging marginal regression approach suggested by Li, Linton and Lu (2015). More specifically, in order to avoid the curse of dimensionality associated with the multivariate nonparametric regression problem and to make it practically implementable, we first estimate the marginal optimal portfolio choice by maximising the conditional utility function for each univariate conditioning variable, and then construct the joint dynamic optimal portfolio through the weighted average of the marginal optimal portfolio across all the conditioning variables. Under some regularity conditions, we establish the large sample properties for the developed portfolio choice procedure. Both the simulation study and empirical application well demonstrate the finite-sample performance of the proposed methodology.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. |
Keywords: | Conditioning variables,Kernel smoothing,Model averaging,Portfolio choice,Utility function |
Dates: |
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Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > Economics and Related Studies (York) The University of York > Faculty of Sciences (York) > Mathematics (York) |
Depositing User: | Pure (York) |
Date Deposited: | 08 Mar 2017 17:00 |
Last Modified: | 26 Nov 2024 00:30 |
Published Version: | https://doi.org/10.1016/j.jeconom.2016.05.009 |
Status: | Published |
Refereed: | Yes |
Identification Number: | 10.1016/j.jeconom.2016.05.009 |
Related URLs: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:113379 |