Related papers: Optimal Savings with Preference for Wealth
CRRA utility where the risk aversion coefficient is a constant is commonly seen in various economics models. But wealth-driven risk aversion rarely shows up in investor's investment problems. This paper mainly focus on numerical solutions…
The purpose of this paper relies on the study of long term affine yield curves modeling. It is inspired by the Ramsey rule of the economic literature, that links discount rate and marginal utility of aggregate optimal consumption. For such…
We investigate the dynamics of wealth inequality in an economy where households have positional preferences, with the strength of the positional concern determined endogenously by inequality of wealth distribution in the society. We…
This paper analyses how risk-taking behaviour and preferences over consumption rank can emerge as a neutrally stable equilibrium when individuals face an anti-coordination task. If in an otherwise homogeneous society information about…
We consider a monopoly insurance market with a risk-neutral profit-maximizing insurer and a consumer with Yaari Dual Utility preferences that distort the given continuous loss distribution. The insurer observes the loss distribution but not…
In this paper, we consider the revealed preferences problem from a learning perspective. Every day, a price vector and a budget is drawn from an unknown distribution, and a rational agent buys his most preferred bundle according to some…
In the context of a large class of stochastic processes used to describe the dynamics of wealth growth, we prove a set of inequalities establishing necessary and sufficient conditions in order to avoid infinite wealth concentration. These…
We provide an axiomatic characterization of lexicographic preferences over the set of all random availability functions using two assumptions. The first assumption is strong monotonicity, which in our framework is equivalent to the strong…
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…
We maximize the expected utility of terminal wealth in an incomplete market where there are cone constraints on the investor's portfolio process and the utility function is not assumed to be strictly concave or differentiable. We establish…
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
Consider a family of portfolio strategies with the aim of achieving the asymptotic growth rate of the best one. The idea behind Cover's universal portfolio is to build a wealth-weighted average which can be viewed as a buy-and-hold…
This paper studies the problem of maximizing the expected utility of terminal wealth for a financial agent with an unbounded random endowment, and with a utility function which supports both positive and negative wealth. We prove the…
We introduce a simple model of economy, where the time evolution is described by an equation capturing both exchange between individuals and random speculative trading, in such a way that the fundamental symmetry of the economy under an…
I show that if the capital accumulation dynamics is stochastic a new term, in addition to that given by accounting prices, has to be introduced in order to derive a correct estimate of the genuine wealth of an economy. In a simple model…
This paper demonstrates how reinforcement learning can explain two puzzling empirical patterns in household consumption behavior during economic downturns. I develop a model where agents use Q-learning with neural network approximation to…
We consider a problem of an optimal consumption strategy on the infinite time horizon when the short-rate is a diffusion process. General existence and uniqueness theorem is illustrated by the Vasicek and so-called invariant interval…
The recent empirical work of Amaya et al. (2015) has pointed out that the realized skewness, which is the sample skewness of intraday high-frequency returns of a financial asset, serves as forecasting future returns in the cross-section.…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
This paper studies an optimal investment and consumption problem with heterogeneous consumption of basic and luxury goods, together with the choice of time for retirement. The utility for luxury goods is not necessarily a concave function.…