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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Optimal Portfolio Choice Under Incomplete Information
TL;DR: In this article, the authors examine whether the assumption of observability of expected returns and other relevant state variables causes significant mis-specification in equilibrium models of asset prices and analyze the impact of estimation error on investment choices.
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Portfolio selection with transactions costs
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Risky income, life cycle consumption, and precautionary savings
TL;DR: In this paper, a closed-form approximation of life cycle consumption subject to uncertain interest rates and earnings is derived by taking a second-order expansion of the Euler equation, and it is shown that precautionary savings against uncertain income can comprise a large fraction of aggregate savings.
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Portfolio and Consumption Decisions under Mean-Reverting Returns: An Exact Solution for Complete Markets
TL;DR: In this article, the optimal portfolio choice problem for an investor with utility over consumption under mean-reverting returns is solved, in closed form, by assuming that markets are complete, and the portfolio allocation takes the form of a weighted average and is shown to be analogous to duration for coupon bonds.
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Exact and computationally efficient likelihood-based estimation for discretely observed diffusion processes (with discussion)
TL;DR: Monte Carlo methods are proposed, which build on recent advances on the exact simulation of diffusions, for performing maximum likelihood and Bayesian estimation for discretely observed diffusions.
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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