Optimum consumption and portfolio rules in a continuous-time model☆
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Cites methods from "Optimum consumption and portfolio r..."
...There are several variations on the Fama and MacBeth procedure, and Foster and Nelson (1996) provide a unified approach that describes the various rolling and blocksampling schemes that have been considered....
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...First, we start with the approach in Foster and Nelson (1996), centered on rolling sample estimators....
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62 citations
62 citations
62 citations
Cites background or methods or result from "Optimum consumption and portfolio r..."
...…the solution in the standard case (to make the comparison easier, we have used a standard notation adopted, for example, in Huang and Litzenberger 1988).12 This result can be seen as i) a confirmation and ii) an extension of a result derived by Merton (1971) and Richard (1975) in a dynamic setup....
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...Namely, when exit time is independent of the portfolio composition, an investor’s utility function belongs to the class of HARA utilities (quadratic utility is a member of that class), and the risky assets prices follow Geometric Brownian Motion, Merton (1971) demonstrates that the optimal portfolio consumption problem with continuous rebalancing maps into the infinite-horizon problem with a re-normalized subjective discount factor....
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...This result both confirms and extends the result in Merton (1971) (see the discussion in Section 4)....
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...Merton (1971), as a special case, also addresses a dynamic optimal portfolio selection problem for an investor retiring at an uncertain date, defined as the date of the first jump of a Poisson process with constant intensity....
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...13 - Merton (1971) and Richard (1975) assume that asset returns are driven by a geometric Brownian motion, hence ruling out a possible deviation from the random walk....
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References
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