Optimal Multiperiod Investment Strategy for Project Portfolio

Project portfolio investment is a crucial decision in many organizations, which must make informed decisions on investment, where the appropriate distribution of investment is complex, due to varying levels of risk, resource requirements, and interaction among the proposed projects. In this paper, we discuss an analytical optimal solution to the mean-variance formulation of the problem of optimization of multiperiod investment strategy for project portfolio. Specifically, analytical optimal multiperiod investment strategy for project portfolio is derived. An efficient algorithm is proposed in order to maximize the expected value of the terminal wealth under constraint that the variance of the terminal wealth is not greater than a preassigned risk level or to minimize the variance of the terminal wealth under constraint that the expected terminal wealth is not smaller than a preassigned level. A numerical example is given.