Optimal Consumption and Portfolio Strategies in a Discrete-Time Model with Summary-Dependent Preferences

This paper investigates optimal consumption and portfolio mixture for a new discrete-time, discrete-state preference model. In this model, the investor's preferences for future consumption depend on current wealth and on past consumption experience through a summary descriptor of past consumpti...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 1982-03, Vol.17 (1), p.1-14
Main Authors: Bodily, Samuel E., White, Chelsea C.
Format: Article
Language:English
Subjects:
Consumption
Decision making models
Endowments
Expected utility
Financial portfolios
Investment
Investment decisions
Investment risk
Investment spending
Investors
Optimal consumption
Portfolio investments
Portfolio management
Utility functions
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Summary:This paper investigates optimal consumption and portfolio mixture for a new discrete-time, discrete-state preference model. In this model, the investor's preferences for future consumption depend on current wealth and on past consumption experience through a summary descriptor of past consumption. Relations between the optimal consumption/investment decisions and the wealth and summary descriptor states are found.
ISSN:0022-1090
1756-6916
DOI:10.2307/2330925