On optimal strategies for utility maximizers in the Arbitrage Pricing Model

TL;DR

This paper investigates optimal investment strategies in the Arbitrage Pricing Model, removing previous restrictions on asset return distributions by employing a new method that requires stronger moment assumptions.

Contribution

It introduces a novel approach that eliminates the need for restrictive tail hypotheses, broadening the applicability of optimal strategy existence results.

Findings

Optimal strategies exist under weaker tail conditions.

New method relies on stronger moment assumptions.

Results extend previous models to more general settings.

Abstract

We consider a popular model of microeconomics with countably many assets: the Arbitrage Pricing Model. We study the problem of optimal investment under an expected utility criterion and look for conditions ensuring the existence of optimal strategies. Previous results required a certain restrictive hypothesis on the tails of asset return distributions. Using a different method, we manage to remove this hypothesis, at the price of stronger assumptions on the moments of asset returns.