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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Journal ArticleDOI
Dynamic Portfolio Selection: The Relevance of Switching Regimes and Investment Horizon
Andreas Graflund,Birger Nilsson +1 more
TL;DR: In this paper, the authors investigated the questions of dynamic portfolio selection and inter-temporal hedging within a Markovian regime-switching framework and highlighted the economic importance of regimes, as optimal portfolio weights are clearly dependent on the prevailing regime.
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Risk premium and fair option prices under stochastic volatility: the HARA solution
TL;DR: Stojanovic et al. as discussed by the authors solved the problem of finding (HARA) fair option price under a general stochastic volatility model, where the risk premium is determined via a solution of a certain nonlinear PDE and a Black-Scholes type PDE.
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Price Impact and Portfolio Impact
Jakša Cvitanić,Semyon Malamud +1 more
TL;DR: In this paper, the authors study price impact and portfolio impact in heterogeneous economies and show that under the equilibrium risk-neutral measure, long-run price impact is in fact equivalent to survival.
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Equilibrium consumption and precautionary savings in a stochastically growing economy
TL;DR: The authors derived a closed-form equilibrium relationship between consumption and wealth, one that holds along a balanced growth path in a stochastic Romer endogenous growth model, and disentangled the coefficient of relative risk aversion from the intertemporal elasticity of substitution.
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On the volatility of stock prices : an exercise in quantitative theory
Rajnish Mehra,Rajnish Mehra +1 more
TL;DR: This paper examines the issues of volatility at the aggregate level using aggregate stock market values and aggregate after-tax net cashflow as a ratio of national income to suggest that large movements cannot be rationalized within the context of the decentralized stochastic growth paradigm.
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.
Book ChapterDOI
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.
Journal ArticleDOI