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Optimal Strategies for Prudent Investors

R. Baviera·M. Pasquini·M. Serva·A. Vulpiani
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Abstract

We consider a stochastic model of investment on an asset of a stock market for a prudent investor. She decides to buy permanent goods with a fraction $\a$ of the maximum amount of money owned in her life in order that her economic level never decreases. The optimal strategy is obtained by maximizing the exponential growth rate for a fixed $\a$. We derive analytical expressions for the typical exponential growth rate of the capital and its fluctuations by solving an one-dimensional random walk with drift.

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R. Baviera, M. Pasquini, M. Serva, A. Vulpiani. 1998-07-20. Optimal Strategies for Prudent Investors. https://arxiv.org/abs/cond-mat/9804297

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