Abstract
We consider the dynamic mean-variance portfolio optimization problem in a continuous-time frame- work. Our objective is to maximize the expected continuous compound return and minimize its variance. We derive the optimal investment strategy and present a closed form mean-variance efficient frontier. We also show that the mean-variance optimization is equivalent to the CRRA utility maximization. The connection between the mean-variance analysis and the Kelly criterion is discussed, and we show that the mean-variance optimal investment strategy is indeed the fractional Kelly criterion.
Published Version
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