Consumption and portfolio selection with labor income: A discrete-time approach

Hyeng Keun Koo

Mathematical Methods of Operations Research, 1999, vol. 50, issue 2, 219-243

Abstract: This paper studies the consumption and portfolio selection problem of an agent who is liquidity constrained and has uninsurable income risk in a discrete time setting. It gives properties of optimal policies and presents numerical solutions. The paper, in particular, shows that liquidity constraints and uninsurable income risk reduce consumption and investment in the risky asset substantially from the levels for the case where no market imperfections exist. This paper also shows how the agent evaluates his or her human capital and relates the evaluation to optimal decisions. Copyright Springer-Verlag Berlin Heidelberg 1999

Keywords: Key words: Consumption; portfolio selection; uninsurable risk; liquidity constraints; non-linear optimization (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:spr:mathme:v:50:y:1999:i:2:p:219-243

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DOI: 10.1007/s001860050096

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