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arXiv · 2403.18528

Limited Attention Allocation in a Stochastic Linear Quadratic System with Multiplicative Noise

Xiangyu Cui·Jianjun Gao·Lingjie Kong
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Abstract

This study addresses limited attention allocation in a stochastic linear quadratic system with multiplicative noise. Our approach enables strategic resource allocation to enhance noise estimation and improve control decisions. We provide analytical optimal control and propose a numerical method for optimal attention allocation. Additionally, we apply our ffndings to dynamic mean-variance portfolio selection, showing effective resource allocation across time periods and factors, providing valuable insights for investors.

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Xiangyu Cui, Jianjun Gao, Lingjie Kong. 2024-03-27. Limited Attention Allocation in a Stochastic Linear Quadratic System with Multiplicative Noise. https://arxiv.org/abs/2403.18528

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