Optimum consumption and portfolio rules in a continuous-time model☆
TLDR
In this paper, the authors considered the continuous-time consumption-portfolio problem for an individual whose income is generated by capital gains on investments in assets with prices assumed to satisfy the geometric Brownian motion hypothesis, which implies that asset prices are stationary and lognormally distributed.About:
This article is published in Journal of Economic Theory.The article was published on 1971-12-01 and is currently open access. It has received 4952 citations till now. The article focuses on the topics: Geometric Brownian motion & Intertemporal portfolio choice.read more
Citations
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Portfolio Choice in the Presence of Housing
TL;DR: In this article, investment in housing plays a crucial role in explaining the patterns of cross-sectional variation in the composition of wealth and the level of stockholdings observed in portfolio composition data.
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Smart Money, Noise Trading and Stock Price Behaviour
John Y. Campbell,Albert S. Kyle +1 more
TL;DR: In this paper, the authors estimate an equilibrium model of stock price behavior in which changes in exponentially de-trended dividends and prices are normally distributed and exogenous "noise traders" interact with "smart-money" investors who have constant absolute risk aversion.
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Portfolio Selection in Stochastic Environments
TL;DR: In this paper, the authors explicitly solve dynamic portfolio choice problems, up to the solution of an ordinary differential equation (ODE), when the asset returns are quadratic and the agent has a constant relative risk aversion (CRRA) coefficient.
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A Stochastic Calculus Model of Continuous Trading: Optimal Portfolios
TL;DR: The problem of choosing a portfolio of securities so as to maximize the expected utility of wealth at a terminal planning horizon is solved via stochastic calculus and convex analysis and a martingale representation problem is developed.
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Consumption puzzles and precautionary savings
TL;DR: The authors showed that precautionary savings can go a long way in making the excess-growth, excess-smoothness and excess-sensitivity features of consumption consistent with the stochastic processes of labor income observed in the U.S. at the microeconomic level.
References
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Journal ArticleDOI
Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case
TL;DR: In this paper, the combined problem of optimal portfolio selection and consumption rules for an individual in a continuous-time model was examined, where his income is generated by returns on assets and these returns or instantaneous "growth rates" are stochastic.
Book
The theory of stochastic processes
David Cox,Hilton D. Miller +1 more
TL;DR: This book should be of interest to undergraduate and postgraduate students of probability theory.
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Lifetime Portfolio Selection By Dynamic Stochastic Programming
TL;DR: In this paper, the optimal consumption-investment problem for an investor whose utility for consumption over time is a discounted sum of single-period utilities, with the latter being constant over time and exhibiting constant relative risk aversion (power-law functions or logarithmic functions), is discussed.
Book
Stochastic Stability and Control
TL;DR: In this article, a book on stochastic stability and control dealing with Liapunov function approach to study of Markov processes is presented, which is based on the work of this article.
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