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Optimal Consumption and Portfolio Strategies in a Discrete-Time Model with Summary-Dependent Preferences


This paper investigates optimal consumption and portfolio mixture for a new discrete-time, discrete-state preference model. In this model, the investor's preferences for future consumption depend on current wealth and on past consumption experience through a summary descriptor of past consumption. Relations between the optimal consumption/investment decisions and the wealth and summary descriptor states are found.

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[6] D. M. Kreps , and E. L. Porteus . “On the Optimality of Structured Policies in Countable Stage Decision Processes, II: Positive and Negative Problems.SIAM Journal of Applied Mathematics (031977), p. 457.

[11] E. L. Porteus OntheOptimality of Structured Policies in Countable Stage Decision Processes.” Management Science, Vol. 22 (1975), p. 148.

[12] M. Rubenstein The Strong Case fortheGeneralized Logarithmic Utility Model as the Premier Model of Financial Markets.” Journal of Finance (051976), p. 551.

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Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
  • URL: /core/journals/journal-of-financial-and-quantitative-analysis
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