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In the introduction a context for this study is established, pointing out how the article relates to an established field of research. This section also provides a rich list of references. Calculations are performed in the framework of a finite information tree. A useful scale invariant recursive utility form is constructed. One of the contributions of the paper is to relax the assumption of an expected-utility CE, allowing for any style of scale-invariant trading constraint. The author exploits a variational approach, which allows one to detach the analysis of the market and the analysis of preferences. Let \(V\) be defined by the process \[ V_t = E\left[\sum_{s=t}^T \frac{\pi_s}{\pi_t} c_s\right], \] where \(\pi\) is a SPD, \(V_t\) represents the cum-dividend time-\(t\) value of a traded contract that generates \(c\) as a dividend process. Suppose the consumption plan \(c\) is financed by the allocation policy \(\left(\rho,\psi\right)\), which generates the wealth process \(W\). Following a central result, \(V=W\) if and only if \(\pi\) is a SPD at \(c\) relative to the market generated by varying \(\rho\), but not \(\psi\). A latter section, `Pricing with SI recursive utility', is central to the article giving pricing results in terms of consumption and market returns. The author illustrates many of the results with motivating examples.
Property / review text: In the introduction a context for this study is established, pointing out how the article relates to an established field of research. This section also provides a rich list of references. Calculations are performed in the framework of a finite information tree. A useful scale invariant recursive utility form is constructed. One of the contributions of the paper is to relax the assumption of an expected-utility CE, allowing for any style of scale-invariant trading constraint. The author exploits a variational approach, which allows one to detach the analysis of the market and the analysis of preferences. Let \(V\) be defined by the process \[ V_t = E\left[\sum_{s=t}^T \frac{\pi_s}{\pi_t} c_s\right], \] where \(\pi\) is a SPD, \(V_t\) represents the cum-dividend time-\(t\) value of a traded contract that generates \(c\) as a dividend process. Suppose the consumption plan \(c\) is financed by the allocation policy \(\left(\rho,\psi\right)\), which generates the wealth process \(W\). Following a central result, \(V=W\) if and only if \(\pi\) is a SPD at \(c\) relative to the market generated by varying \(\rho\), but not \(\psi\). A latter section, `Pricing with SI recursive utility', is central to the article giving pricing results in terms of consumption and market returns. The author illustrates many of the results with motivating examples. / rank
 
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Property / Mathematics Subject Classification ID
 
Property / Mathematics Subject Classification ID: 91B16 / rank
 
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Property / Mathematics Subject Classification ID
 
Property / Mathematics Subject Classification ID: 91B24 / rank
 
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Property / Mathematics Subject Classification ID
 
Property / Mathematics Subject Classification ID: 91B25 / rank
 
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Property / Mathematics Subject Classification ID
 
Property / Mathematics Subject Classification ID: 91G10 / rank
 
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Property / zbMATH DE Number
 
Property / zbMATH DE Number: 6208205 / rank
 
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Property / zbMATH Keywords
 
asset pricing theory
Property / zbMATH Keywords: asset pricing theory / rank
 
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Property / zbMATH Keywords
 
portfolio theory
Property / zbMATH Keywords: portfolio theory / rank
 
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Property / zbMATH Keywords
 
recursive utility
Property / zbMATH Keywords: recursive utility / rank
 
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Property / zbMATH Keywords
 
Knightian uncertainty
Property / zbMATH Keywords: Knightian uncertainty / rank
 
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Property / zbMATH Keywords
 
ambiguity aversion
Property / zbMATH Keywords: ambiguity aversion / rank
 
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Property / reviewed by
 
Property / reviewed by: John G. O'Hara / rank
 
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Property / MaRDI profile type
 
Property / MaRDI profile type: MaRDI publication profile / rank
 
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Property / full work available at URL
 
Property / full work available at URL: https://doi.org/10.1007/s11579-013-0103-z / rank
 
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Property / OpenAlex ID
 
Property / OpenAlex ID: W2164764535 / rank
 
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Latest revision as of 21:35, 6 July 2024

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Scale-invariant asset pricing and consumption/portfolio choice with general attitudes toward risk and uncertainty
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    Scale-invariant asset pricing and consumption/portfolio choice with general attitudes toward risk and uncertainty (English)
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    13 September 2013
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    In the introduction a context for this study is established, pointing out how the article relates to an established field of research. This section also provides a rich list of references. Calculations are performed in the framework of a finite information tree. A useful scale invariant recursive utility form is constructed. One of the contributions of the paper is to relax the assumption of an expected-utility CE, allowing for any style of scale-invariant trading constraint. The author exploits a variational approach, which allows one to detach the analysis of the market and the analysis of preferences. Let \(V\) be defined by the process \[ V_t = E\left[\sum_{s=t}^T \frac{\pi_s}{\pi_t} c_s\right], \] where \(\pi\) is a SPD, \(V_t\) represents the cum-dividend time-\(t\) value of a traded contract that generates \(c\) as a dividend process. Suppose the consumption plan \(c\) is financed by the allocation policy \(\left(\rho,\psi\right)\), which generates the wealth process \(W\). Following a central result, \(V=W\) if and only if \(\pi\) is a SPD at \(c\) relative to the market generated by varying \(\rho\), but not \(\psi\). A latter section, `Pricing with SI recursive utility', is central to the article giving pricing results in terms of consumption and market returns. The author illustrates many of the results with motivating examples.
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    asset pricing theory
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    portfolio theory
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    recursive utility
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    Knightian uncertainty
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    ambiguity aversion
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