A Multi-Cycle Dynamic Programming Optimization Model Of Portfolio

Now,there appear many theories that are widely employed in the financial research,such as:non-linear economic theory,economic chaotic theory and other engineering research methods. However these theories can't take the primary place of Markowitz's Portfolio Theory,which are consistent in logic,simple in form and widely accepted by investors and men of learning. Classic portfolio theory deals with the situation in a single investment cycle. The mate of asset return can be determined in one in inherent cycle,but the duration of the cycle and the relation with the next cycle can't be decided.On along using two assumptions in Portfolio Theory:market efficient and investors are risk-aversion,this thesis constructs a multi-cycle portfolio model and works out the investor's investment strategy,with the analysis of investor's risk preference and the function of investor's risk-aversion and making use of dynamic programming optimization method. In a multi-cycle period,with the expectation of higher non-risk interest rate,investors would prefer risk assets to non-risk assets that do not conform to the subjection conjecture. This conclusion is meaningful in guidance of investor's decision and conducive to the comprehension of the phenomenon of persistent high household saving level in our country. Furthermore,the thesis is useful in the further explanation of investor's behaviors and the understanding of the characteristics of investor's risk-aversion,and it can proffer theoretical for macro-control of the capital market.