Journal of Financial and Quantitative Analysis

Research Article

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

Samuel E. Bodily* and Chelsea C. White*

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.

Footnotes

* Both authors, University of Virginia. The research by Chelsea C. White was supported by NSF Grant ENG76-15774.

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