Portfolio Selection with Little Information about the Future

Klaus Hellwig

In multiperiod portfolio selection one faces the problem of choosing a proper multiperiod utility function, to determine the planning horizon and the number of future opportunities as well as the financial consequences of these opportunities. In this paper an alternative approach is proposed where the initial portfolio value is required to follow some given growth pattern. Following this approach it is shown that under reasonable assumptions a solution can be found that requires neither a utility function nor information about the planning horizon, the required growth rates, the number of future opportunities or the financial consequences of these opportunities.