Optimal Consumption and Portfolio Rules: With Durability and Local Substitution (Classic Reprint) - Softcover
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Excerpt from Optimal Consumption and Portfolio Rules: With Durability and Local Substitution
Two interesting economic notions are captured in two different interpretations of the model specified in (1) and In one interpretation, preferences given by (1) embody the idea of local substitution, that is consumptions at nearby dates are almost perfect substitutes. In a second interpretation, the model represents preferences over the service flows from irreversible purchases of a durable good that decays over time.
Local substitution in continuous time, studied by Hindy, Huang and Kreps (1991) and Hindy and Huang is the notion that consumption at a point in time depresses marginal utility of consumption at nearby times. Suppression of appetite following a large meal is a natural phenomenon that leads to periodic consumption. In addition, local substitution implies that delaying or advancing consumption for a short period of time has little effect on satisfaction. In other words, agents regard consuming at adjacent dates as very similar alternatives.
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Optimal Consumption and Portfolio Rules: With Durability and Local Substitution
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Paperback. Zustand: New. Print on Demand. This book examines consumption and portfolio choice in scenarios involving durability and local substitution preferences. In contrast to neoclassical economics, the author introduces a model where goods possess an exponentially weighted moving average utility. This model captures scenarios where the preference for consumption at a given time is highly correlated with prior consumption patterns. Unlike neoclassical economics where typical recommendations are to delay consumption as long as possible, the author shows that in the presence of either durability or local substitution, the optimal consumption patterns may consist of periodic jumps followed by zero consumption for extended periods. In particular, the model finds that the presence of a durable good or the consumption patterns described by local substitution lead to lower equilibrium risk premiums, or a lower spread between the expected return on risky and riskless assets. The author further demonstrates that when measured over longer periods, the consumption of a durable good will exhibit characteristics and properties that are distinct from those of a perishable good. This book is a reproduction of an important historical work, digitally reconstructed using state-of-the-art technology to preserve the original format. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in the book. print-on-demand item. Bestandsnummer des Verkäufers 9781332273270_0
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Optimal Consumption and Portfolio Rules With Durability and Local Substitution Classic Reprint
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PAP. Zustand: New. New Book. Shipped from UK. Established seller since 2000. Bestandsnummer des Verkäufers LW-9781332273270
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Optimal Consumption and Portfolio Rules With Durability and Local Substitution Classic Reprint
Anbieter: PBShop.store UK, Fairford, GLOS, Vereinigtes Königreich
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PAP. Zustand: New. New Book. Shipped from UK. Established seller since 2000. Bestandsnummer des Verkäufers LW-9781332273270
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