Robo-advising: a dynamic mean-variance approach
Files
Accepted manuscript
Date
2021-06-16
Authors
Dai, Min
Jin, Hanqing
Kou, Steven
Xu, Yuhong
Version
Accepted manuscript
OA Version
Citation
Dai, M., Jin, H., Kou, S. et al. Robo-advising: a dynamic mean-variance approach. Digit Finance (2021). https://doi.org/10.1007/s42521-021-00028-4
Abstract
In contrast to traditional financial advising, robo-advising needs to elicit investors’ risk profile via several simple online questions and provide advice consistent with conventional investment wisdom, e.g., rich and young people should invest more in risky assets. To meet the two challenges, we propose to do the asset allocation part of robo-advising using a dynamic mean-variance criterion over the portfolio’s log returns. We obtain analytical and time-consistent optimal portfolio policies under jump-diffusion models and regime-switching models.