Multi-Period Consumption Decision under Conditions of Uncertainty
An investor is faced with several investment alternatives. Any investment plan induces a vector of consumption where the consumption in each period is a random variable. Obviously, the optimal vector of consumption is determined by the multi-period utility function. However, in most cases we have no information on the investor's preference, and hence we cannot choose the optimal consumption strategy. Assuming that the multi-period utility function is nondecreasing we establish a decision rule which divides the feasible set of consumption strategies into two sets: the "efficient set" and the "inefficient set." Thus, in the second step each investor selects the optimal consumption strategy from the efficient set according to his preference.
Year of publication: |
1976
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Authors: | Levy, Haim |
Published in: |
Management Science. - Institute for Operations Research and the Management Sciences - INFORMS, ISSN 0025-1909. - Vol. 22.1976, 11, p. 1258-1267
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Publisher: |
Institute for Operations Research and the Management Sciences - INFORMS |
Saved in:
Online Resource
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