Intertemporal Resolution of Uncertainty and Portfolio Behavior

Devinder K Gandhi, Muhammad Rashid and Kenneth D Riener

The Financial Review, 1989, vol. 24, issue 3, 491-97

Abstract: In this paper, it is shown that the early resolution of uncertainty improves the welfare of an investor who has utility defined over his intertemporal consumption. This result arises because the early resolution of uncertainty permits the investor the additional flexibility of rearranging his initial consumption. In contrast, if the investor has utility for terminal wealth, there is no effect on his portfolio behavior from the early resolution of uncertainty. Copyright 1989 by MIT Press.

Date: 1989
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