LAUSR

We consider the portfolio optimization problem for a multiperiod investor who seeks to maximize her utility of consumption facing multiple risky assets and proportional transaction costs in the presence of return predictability. Due to the curse of dimensionality, this problem is very difficult to solve even numerically. In this paper, we propose several feasible policies that are based on optimizing quadratic programs. These proposed feasible policies can be easily computed even for many risky assets. We show how to compute upper bounds and use them to study how the losses associated with using the approximate policies depend on different problem parameters.