Optimal Dynamic Portfolio Risk Management

The authors formulate and solve the multiperiod optimal portfolio choice problem.  They show that the investor typically behaves myopically, and the multiperiod solution can be reduced to a single-period Markowitz solution.  They find the optimal capital allocation consists in holding a position in the risky port­folio that is inversely proportional to the risky portfolio variance.  Across several models, they find that the minimum variance portfolio with short-sale restrictions performs best among all competing models with dynamic risk control. To forecast the covariance matrix with high precision, practitioners are advised to use the multivariate GARCH forecast.


KAMULIN, V. (2016). Optimal Dynamic Portfolio Risk Management. Journal Of Portfolio Management, 43(1), 85-99.