Multi-period power utility optimization under stock return predictability

Abstract In this paper, we derive an analytical solution to the dynamic optimal portfolio choice problem in case of investor equipped with a power utility function wealth. The results are established by solving Bellman backward recursion under assumption that vector asset returns follows vector-autoregressive process predictable variables. empirical study, performance derived is compared one obtained applying numerical method. comparison performed terms final wealth and its expected utility. It documented application multi-period leads higher values both