Optimal long term growth rate of expected utility of wealth (Q1578591)

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scientific article; zbMATH DE number 1500261
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    Optimal long term growth rate of expected utility of wealth
    scientific article; zbMATH DE number 1500261

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      Optimal long term growth rate of expected utility of wealth (English)
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      4 September 2000
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      Using the technique of dynamic programming, the paper analyses in detail investment policies which result in optimal long term growth of expected utility of wealth under the following assumptions: The portfolio consists of one risky and one riskless asset and no transaction costs are considered; The price of stock is logarithmic Brownian motion with a constant volatility and a linear deterministic drift, i.e., Ornstein-Uhlenbeck type of model; HARA utility function with exponent \(\infty< \gamma<1\) is used. Both the unconstrained control (the fraction of wealth invested in the risky asset) and control limited to a finite interval or to \([0,+\infty)\) are considered. Interesting differences come out for positive values of \(\gamma\), for \(\gamma\to 0\) and for \(\gamma<0\). In the last case, it turns out that values of \(\gamma\geq -3\) and those smaller than \(-3\) have to be distinguished.
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      long-term growth rate
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      Ornstein-Uhlenbeck process
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      HARA utility function
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      optimal policy
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