Consider an individual making a portfolio choice at date T involving two assets. The (gross) returns at t per unit invested at t 1 are Yit and Y2t* The individual has observed these returns from t = 0 to t = T. He has also observed the values of the variables Y3t',... YKt, which are thought to be relevant in forecasting future returns. Thus, the information available to him when he makes his portfolio choice is z = {(Yt ... YKt)} t=0. He invests one unit, divided between an amount a in asset 1 and an amount 1 a in asset 2, and he then holds on to the portfolio until date T + H. Let w = {(Yit, Y2t)}T:H+ 1 and let h(w, a) denote the value of the portfolio at t T + H: