Portfolio Choice with Uncertain Consumption Prices: a mean-variance approch

Peter Berck and Stephen Cecchetti

No 37852, CUDARE Working Papers from University of California, Berkeley, Department of Agricultural and Resource Economics

Abstract: This paper presents a mean-variance model of portfolio choice and asset pricing when the price of consumption goods as well as the return to assets is uncertain. The correlation of an assets return with purchases at expected prices is shown to reduce both the mean return and the variance of the return of an asset. A numerical approximation is computed to check the accuracy of the mean and variance approximation. Uncertainty of consumption prices is shown to result in long (or speculative) futures holding.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 19
Date: 1980-12
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https://ageconsearch.umn.edu/record/37852/files/CUDARE%20158%20Berck.pdf (application/pdf)

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Working Paper: Portfolio Choice with Uncertain Consumption Prices: a mean-variance approch (1980)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucbecw:37852

DOI: 10.22004/ag.econ.37852

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