Optimum consumption and portfolio rules in a continuous-time model☆
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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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Economic Links and Predictable Returns
Lauren Cohen,Andrea Frazzini +1 more
TL;DR: In this article, the authors show that stock prices do not incorporate news involving related firms, generating predictable subsequent price moves, and a long-short equity strategy based on this effect yields monthly alphas of over 150 basis points.
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The asymptotic elasticity of utility functions and optimal investment in incomplete markets
TL;DR: In this article, the authors studied the problem of maximizing the expected utility of terminal wealth in the framework of a general incomplete semimartingale model of a financial market and showed that the necessary and sufficient condition on a utility function for the validity of several key assertions of the theory to hold true is the requirement that the asymptotic elasticity of the utility function is strictly less then one.
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Portfolio Choice and Asset Prices: The Importance of Entrepreneurial Risk
John Heaton,Deborah Lucas +1 more
TL;DR: In this paper, the authors show that entrepreneurial income risk has a significant impact on portfolio choice and asset prices, and they find that households with high and variable business income hold less wealth in stocks than other similarly wealthy households, although they constitute a significant fraction of the stockholding population.
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Consumption and Portfolio Decisions when Expected Returns are Time Varying
John Y. Campbell,Luis M. Viceira +1 more
TL;DR: In this paper, an approximate analytical solution to the optimal consumption and portfolio choice problem of an infinitely lived investor with Epstein-Zin-Weil utility who faces a constant riskless interest rate and a time-varying equity premium is presented.
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Interest Rate Volatility and the Term Structure: A Two-Factor General Equilibrium Model
TL;DR: In this paper, the authors developed a two-factor general equilibrium model of the term structure of interest rates and derived closed-form expressions for discount bonds and analyzed the properties of the terms implied by the model.
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.
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