Multi-period Portfolio Optimization With Alpha Decay
Author: Kartik Sivaramakrishnan, Vishv Jeet, and Dieter Vandenbussche
The traditional Markowitz MVO approach is based on a single-period model. Single-period models do not utilize any data or decisions beyond the rebalancing time horizon with the result that their policies are myopic in nature. For long-term investors, multi-period optimization offers the opportunity to make wait-and-see policy decisions by including approximate forecasts and long-term policy decisions beyond the rebalancing time horizon.