Abstract: Although the mean variance model has been widely used and proved to be effective in the process of static portfolio optimization, the effectiveness of the mean variance model in the process of dynamic portfolio optimization in the dynamic scenario has aroused people's doubts: One is that the setting of constant risk aversion coefficient does not conform to the fact, and the other is that the investor preferences do not fit the mainstream utility function family under the dynamic situation. In view of this, the effectiveness of dynamic mean-variance portfolio is studied by assuming that the investor's risk tolerance is a function of portfolio's investment horizon and investor's expected return rate.Based on mean-variance framework, the model of dynamic portfolio under time-varying risk tolerance is constructed; it uses the Ito theorem and Lagrange multiplier method to obtain the closed-form solution of optimal portfolio; comparing with the dynamic portfolio under quadratic utility preference, it tests the strategy and performance of dynamic mean-variance portfolio from the aspects of portfolio strategy, Sharpe ratio, certainty equivalent rate of return, and efficient frontier, and does an empirical study.The results show, the dynamic mean-variance portfolio not only has the same performance, but also embodies its flexibility and risk hedging value; although the dynamic mean-variance portfolio shows high leverage, the certainty equivalent rate of return is higher, and presents the trend of inverted U shape with the increasing of investment horizon; the dynamic mean-variance portfolio has a significant effect of investment horizon, which is stronger than that of expected return rate. It is pointed out that the strategy of dynamic mean-variance portfolio management and optimization under time-varying risk tolerance is effective, but is not suit for short investment horizon (less than 12 months) and(or) low expected yield. The study not only extends the application of mean-variance model under the dynamic situation, but also reflects the adjustment of investment behavior due to the changing of investor's psychology and (or) his wealth.

Key words: dynamic mean-variance portfolio, time-varying risk tolerance, effectiveness, strategy and performance