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

Peter Berck and Stephen Cecchetti

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

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: consumption; investments; prices; risk; Social and Behavioral Sciences (search for similar items in EconPapers)
Date: 1980-12-01
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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:cdl:agrebk:qt38t9z8b9

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