Markowitz's Mean-Variance Portfolio Selection With Regime Switching: From Discrete-Time Models to Their Continuous-Time Limits

Journal article

We study a discrete-time version of Markowitz's mean-variance portfolio selection problem where the market parameters depend on the market mode (regime) that jumps among a finite number of states. The random regime switching is delineated by a finite-state Markov chain, based on which a discrete-time Markov modulated portfolio selection model is presented. Such models either arise from multiperiod portfolio selections or result from numerical solution of continuous-time problems. The natural ...

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Authors: Yin, G; Zhou, X

• Journal: IEEE Transactions on Automatic Control
• Volume: 49
• Issue: 3
• Pages: 349-360
• Publication date: 2004-03-01
• DOI: 10.1109/TAC.2004.824479
• ISSN: 0018-9286
• Language: English
• Keywords: Markov chain; Markowitz's mean-variance portfolio selection; Switching diffusion; Singular perturbation; Linear-quadratic problem; Discrete-time model