Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212096 
Authors: 
Year of Publication: 
2008
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 5/2008
Publisher: 
Bank of Finland, Helsinki
Abstract: 
It is well known that under certain assumptions the strategy of an investor maximizing his expected utility coincides with the mean-variance optimal strategy. In this paper we show that the two strategies are not equal in general and find the connection between a utility maximizing and a mean-variance optimal strategy in a continuous semimartingale model. That is done by showing that the utility maximizing strategy of a CARA investor can be expressed in terms of expectation and the expected quadratic variation of the underlying price process. It coincides with the mean-variance optimal strategy if the underlying price process is a local martingale.
Subjects: 
mean-variance portfolios
utility maximization
dynamic portfolio selection
quadratic variation
JEL: 
G11
C61
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-427-5
Document Type: 
Working Paper

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