Resumen de Portfolio choice beyond the traditional approach

Francisco Peñaranda

• This paper surveys portfolio construction methods that extend the traditional approach. An important feature of the traditional approach is that investor's preferences are defined on the mean and variance of random outcomes. However, there are other important features that are not always made explicit regarding investor's wealth, information, and horizon: The investor makes a single portfolio choice based on the mean and variance of her final financial wealth and she knows the relevant parameters in that computation. First, the paper describes the traditional portfolio choice based on the previous four assumptions, while the rest of sections extend those assumptions. Each section describes the corresponding equilibrium implications regarding portfolio advice and asset pricing.