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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Incomplete information equilibria: Separation theorems and other myths
TL;DR: The authors examines issues and concepts essential to understanding, implementing, and testing incomplete information financial economic equilibrium and understanding its relation to complete information equilibria (CIE), including the relative level of variable variances in a CIE and the corresponding IIE, the relationship between IIE and incomplete markets, the persistence of heterogeneous beliefs, and the relation of IIE to model uncertainty/ambiguity approaches.
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An Asset-Pricing View of External Adjustment
TL;DR: In this paper, the authors introduce equity holdings and portfolio choice into an otherwise conventional open-economy dynamic equilibrium model, and find that the excessive emphasis put in the literature on solving models with incomplete markets for the sole purpose of obtaining nontrivial implications for the current account is misplaced.
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On aggregation of information in competitive markets: The dynamic case
TL;DR: In this article, the authors examined how a dynamic competitive security market aggregates and communicates information between various market participants at every instant. And they showed that the market price reflects only that part of private information which is common to many signals and extended Hellwig's single-period results to a multi-period model.
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A Stochastic Control Approach to the Pricing of Options
Emmanuel N. Barron,R. Jensen +1 more
TL;DR: A stochastic control model of a portfolio in which the investor may invest in stock, call options on the stock, or risk free bonds, and may also borrow funds is constructed and the optimal portfolios and returns are derived.
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Certainty equivalence and logarithmic utilities in consumption/investment problems
TL;DR: In this article, the authors investigated an optimal consumption/investment decision problem with partially observable drift and proved that the certainty equivalence principle holds for the case of logarithmic utilities.
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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