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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Contagion as a Wealth Effect
Albert S. Kyle,Wei Xiong +1 more
TL;DR: In this article, the authors describe financial contagion as a wealth effect in a continuous-time model with two risky assets and three types of traders, i.e., convergence traders with logarithmic utility trade optimally in both markets, while noise traders trade randomly in one market.
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Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence
TL;DR: In this paper, the authors derived closed-form solutions for consumption with stochastic labor income and constant relative risk aversion utility, and used a numerical technique to give an accurate approximation to the solution.
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Labor supply flexibility and portfolio choice in a life cycle model
TL;DR: In this paper, the authors examined the effect of the labor-leisure choice on portfolio and consumption decisions over an individual's life cycle and showed that labor and investment choices are intimately related.
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Investor attention, overconfidence and category learning
Lin Peng,Wei Xiong,Wei Xiong +2 more
TL;DR: The authors show that limited investor attention leads to category-learning behavior, i.e., investors tend to process more market and sector-wide information than firm-specific information, which generates important features observed in return comovement that are otherwise difficult to explain with standard rational expectations models.
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A model of international asset pricing
TL;DR: In this article, an intertemporal model of international asset pricing is constructed which admits differences in consumption opportunity sets across countries, and it is shown that the real expected excess return on a risky asset is proportional to the covariance of the return of that asset with changes in the world real consumption rate.
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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