Intertemporal Cost-efficient Consumption
We aim to provide an intertemporal, cost-efficient consumption model that extends the consumption optimization inspired by the Distribution Builder, a tool developed by Sharpe, Johnson, and Goldstein. The Distribution Builder enables the recovery of investors' risk preferences by allowing them to select a desired distribution of terminal wealth within their budget constraints. This approach differs from the classical portfolio optimization, which considers the agent's risk aversion modeled by utility functions that are challenging to measure in practice. Our intertemporal model captures the dependent structure between consumption periods using copulas. This strategy is demonstrated using both the Black-Scholes and CEV models.
Code (0)
등록된 구현이 없습니다.
Tasks
Portfolio OptimizationSimilar Papers 제목 키워드 기반
Intertemporal Consumption and Debt Aversion: A Replication and Extension
We replicate Meissner (2016), where debt aversion was reported for the first time in an intertemporal consumption and saving problem. While Meissner (2016) uses a German sample, our participants are US undergraduate stud…
Robust Comparative Statics for the Elasticity of Intertemporal Substitution
We study a general class of consumption-savings problems with recursive preferences. We characterize the sign of the consumption response to arbitrary shocks in terms of the product of two sufficient statistics: the elas…
UnityRegret Theory And Asset Pricing Anomalies In Incomplete Markets With Dynamic Un-Aggregated Preferences
Although the CML (Capital Market Line), the Intertemporal-CAPM, the CAPM/SML (Security Market Line) and the Intertemporal Arbitrage Pricing Theory (IAPT) are widely used in portfolio management, valuation and capital mar…
ManagementRecovering Preferences from Finite Data
We study preferences estimated from finite choice experiments and provide sufficient conditions for convergence to a unique underlying "true" preference. Our conditions are weak, and therefore valid in a wide range of ec…
validMartingale Consumption
We propose martingale consumption as a natural, desirable consumption pattern for any given (proportional) investment strategy. The idea is to always adjust current consumption so as to achieve level expected future cons…