A generalization of Dybvig¡¯s result on portfolio selection with intolerance for decline in consumption

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• 作者：Byung Lim Koo^a ; ^{koolimy@hotmail.com} ; Hyeng Keun Koo^b ; ^{koo_h@hanmail.net} ; ^{hkoo@ajou.ac.kr} ; Jung Lim Koo^a ; ^{koolimy@gmail.com} ; ChongSeok Hyun^b ; ^{ordeeq@ajou.ac.kr}
• 关键词：C61 ; D91 ; G11
• 刊名：Economics Letters
• 出版年：2012
• 出版时间：December, 2012
• 年：2012
• 卷：117
• 期：3
• 页码：646-649
• 全文大小：206 K

文摘

In this note we show the following result of is valid for a general von Neumann-Morgenstern utility function: for an agent who does not tolerate a decline in consumption, the optimal investment out of discretionary wealth (in excess of the perpetuity value of current consumption) in the risky asset does not depend on the risk aversion coefficient of her felicity function locally when she does not adjust her consumption. The homotheticity assumption is not required. An implication of our result is that if an economic agent exhibits non-time-separable preference due to intertemporal linkage of consumption, her risk-taking over a short time period can be independent of her felicity function.