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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Explicit solution of a general consumption/portfolio problem with subsistence consumption and bankruptcy*
TL;DR: In this paper, a general continuous-time single-agent consumption and portfolio decision problem with subsistence consumption in closed form is solved, where consumption must be no smaller than a given subsistence rate and bankruptcy can occur.
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Optimal insurance in a continuous-time model
TL;DR: In this article, the authors seek the optimal dynamic consumption, investment, and insurance strategies for an individual who seeks to maximize her expected discounted utility of consumption and bequest over a fixed or random horizon, such as her random future lifetime.
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How Does the Spirit of Capitalism Affect Stock Market Prices
TL;DR: This article showed that the way in which the spirit of capitalism impinges upon asset prices depends on the interaction of impatience, willingness to substitute over time, and ordinal preferences between consumption and status, in addition to risk aversion.
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Controlled stochastic differential equations under Poisson uncertainty and with unbounded utility
TL;DR: In this paper, it was shown that the Hamilton-Jacobi-Bellman equation can still be used as a necessary criterion for optimality if the utility function and the coefficients are linearly bounded.
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Time preference and capital asset pricing models
TL;DR: In this paper, the theory of individual optimal consumption-investment choice under uncertainty is extended to a class of intertemporally dependent preferences for consumption streams, which are more realistic than the separable time-additive preference structure, and the results are then used to show that Merton's multi-beta intertemporal capital asset pricing model is still valid, but it can no longer be collapsed to Breeden's single consumption-beta model.
References
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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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