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
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Equilibrium asset prices and exchange rates
TL;DR: In this paper, an intertemporal international general equilibrium for two logarithmic representative agents is constructed in a two-country two-good world, and the equilibrium expected rate of change of the exchange rate increases with the differential of interest rates and the volatility of the domestic equity markets.
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Twin Picks: Disentangling the Determinants of Risk‐Taking in Household Portfolios
Laurent E. Calvet,Paolo Sodini +1 more
Abstract: This paper investigates risk-taking in the liquid portfolios held by a large panel of Swedish twins. We document that the portfolio share invested in risky assets is an increasing and concave function of financial wealth, leading to different risk sensitivities across investors. Human capital, which we estimate directly from individual labor income, also affects risk-taking positively, while internal habit and expenditure commitments tend to reduce it. Our microfindings lend strong support to decreasing relative risk aversion and habit formation preferences. Furthermore, heterogeneous risk sensitivities across investors help reconcile individual preferences with representative-agent models.
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Dynamic asset allocation in a mean-variance framework
TL;DR: In this article, the authors analyze the portfolio strategies that are mean-variance efficient when continuous rebalancing is allowed between the current date (0) and the horizon (T).
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Dynamic Asset Allocation with Stochastic Income and Interest Rates
Claus Munk,Carsten Sørensen +1 more
TL;DR: In this paper, the optimal investment and consumption choice of individual investors with uncertain future labor income operating in a financial market with stochastic interest rates is investigated, where the present value of the individual's future income is a main determinant of the optimal behavior and this present value depends heavily on the interest rate dynamics.
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Robust Control and Recursive Utility
TL;DR: It is shown that a finite-horizon version of the robust control criterion appearing in recent papers by Hansen, Sargent, and their coauthors can be described as recursive utility, which in continuous time takes the form of the Stochastic Differential Utility of Duffie and Epstein (1992).
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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