Risk Aversion and Portfolio Selection in a Continuous-Time Model
Portfolio Management
2012-01-04 v3 Optimization and Control
Probability
Abstract
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and deterministic coefficients. It turns out that the indirect utility functions inherit the order of risk aversion (in the Arrow-Pratt sense) from the von Neumann-Morgenstern utility functions, and therefore, a more risk-averse agent would invest less wealth (in absolute value) in the risky assets.
Keywords
Cite
@article{arxiv.0805.0618,
title = {Risk Aversion and Portfolio Selection in a Continuous-Time Model},
author = {Jianming Xia},
journal= {arXiv preprint arXiv:0805.0618},
year = {2012}
}
Comments
Published in SIAM Journal on Control and Optimization after a major revision