A CONCISE CHARACTERIZATION OF OPTIMAL CONSUMPTION WITH LOGARITHMIC PREFERENCES

Ralf Korn () and Frank Thomas Seifried ()
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Ralf Korn: Department of Mathematics, University of Kaiserslautern, Erwin-Schrödinger-Straße, 67663 Kaiserslautern, Germany
Frank Thomas Seifried: Department of Mathematics, University of Kaiserslautern, Erwin-Schrödinger-Straße, 67663 Kaiserslautern, Germany

International Journal of Theoretical and Applied Finance (IJTAF), 2013, vol. 16, issue 06, 1-7

Abstract: In a general semi-martingale financial market with possibly nonlinear wealth dynamics, incomplete information, and ambiguity, we show that the optimal consumption decision of an agent with logarithmic preferences can be separated from the agent's investment decisions. Using minimal assumptions and mathematical machinery, we demonstrate that the optimal consumption/wealth ratio is deterministic, and we derive an explicit formula for it.

Keywords: Consumption-portfolio optimization; logarithmic preferences; separation; myopic decision making (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0219024913500350

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