Note on "Optimal Growth Portfolios when Yields are Serially Correlated"

Abstract

In [2] Hakansson and Liu presented a multiperiod portfolio model in which there is an optimal myopic policy. In particular, at any decision point j and state m the optimal amount to invest in opportunity i, namely , may be found by maximizing(42a) subject to(42b) (42c) ,where the expectation is taken with respect to the I²'s, and the p's and r are positive constants (r > 1). Assumptions are made in [2] which guarantee that (42) has a unique optimal solution and that the set of vijm which satisfies (42b and 42c) is a nonempty, compact, convex set for all j and m.