Optimal Portfolios for Different Holding Periods and Target Returns
DOI:
https://doi.org/10.61190/fsr.v12i1.4754Keywords:
Optimal allocations, Downside risk, Time diversificationAbstract
This paper examines the allocations of U.S. financial assets in optimal portfolios that minimize the proportion of downside risk, measured by deviations from target returns, to mean real terminal value. T-bills dominate the optimal portfolio only tor short-term investors with a low target. Intermediate government bonds are the major investment tor short-term investors with a medium target and for medium-term investors with low or medium targets. For a high target, stocks are the primary component of the optimal portfolio. For medium and high targets over a long holding period, the optimal portfolio consists solely of small stocks. O 2003 Academy of Financial Services. All rights reserved.
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