Optimal investment and consumption with forward preferences and uncertain parameters

Wing Fung Chong and Gechun Liang ()

Papers from arXiv.org

Abstract: This paper studies robust forward investment and consumption preferences within a zero-volatility context. Different from previous works, we consider an incomplete financial market model due to general investment portfolio constraints. We provide a new PDE characterization and a novel semi-explicit saddle-point construction of forward preferences and optimal strategies. We further present a more detailed construction of forward preferences and optimal strategies under constant relative risk aversion (CRRA). Key findings emphasize the necessity of a specific relationship between the initial investment preference and the forward consumption preference, indicating a long-term decreasing trend in forward consumption preference behavior.

Date: 2018-07, Revised 2023-11
New Economics Papers: this item is included in nep-knm and nep-upt
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1807.01186

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