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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: 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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Knightian uncertainty | |||
Property / zbMATH Keywords: Knightian uncertainty / rank | |||
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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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links / mardi / name | links / mardi / name | ||
Latest revision as of 21:35, 6 July 2024
scientific article
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English | 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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