Optimal portfolio choice and consistent performance

摘要

Consistent financial performance is the key element to success in asset management. We use a dynamic wealth constraint to represent the consistent performance requirement, which takes into account the entire historical records as a benchmark so that the wealth always stays at or above the benchmark. The optimal policy under this wealth constraint is characterized, and several implications are presented in this paper. This consistent performance constraint could be an appealing tool to be implemented in a volatile market and have rich practical implications.