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Multiperiod portfolio optimization with multiple risky assets and general transaction costs


Journal of Banking and Finance


Management Science and Operations

Authors / Editors

Mei X;DeMiguel V;Nogales F


Publication Year



We analyze the optimal portfolio policy for a multiperiod mean-variance investor facing multiple risky assets in the presence of general transaction costs. For proportional transaction costs, we give a closed-form expression for a no-trade region, shaped as a multi-dimensional parallelogram, and show how the optimal portfolio policy can be eciently computed for many risky assets by solving a single quadratic program. For market impact costs, we show that at each period it is optimal to trade to the boundary of a state-dependent rebalancing region. Finally, we show empirically that the losses associated with ignoring transaction costs and behaving myopically may be large.


Portfolio optimization; multiperiod utility; no-trade region; market impact

Available on ECCH


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