2022/12/14 by Lin Chen, Xun Yu Zhou, Chen, Lin +1
Economics, Econometrics and Finance · #91B28 #Complex Systems and Time Series Analysis #Economic theories and models #FOS: Economics and business #Financial Markets and Investment Strategies #Mathematical Finance (q-fin.MF)
paper · pdf · doi:10.48550/arxiv.2212.07516
openalex publication_date 2022/12/14 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We study a continuous-time Markowitz mean-variance portfolio selection model in which a naive agent, unaware of the underlying time-inconsistency, continuously reoptimizes over time. We define the resulting naive policies through the limit of discretely naive policies that are committed only in very small time intervals, and derive them analytically and explicitly. We compare naive policies with pre-committed optimal policies and with consistent planners' equilibrium policies in a Black-Scholes market, and find that the former are mean-variance inefficient starting from any given time and wealth, and always take riskier exposure than equilibrium policies.