A CONCISE CHARACTERIZATION OF OPTIMAL CONSUMPTION WITH LOGARITHMIC PREFERENCES

In a general semi-martingale financial market with possibly nonlinear wealth dynamics, incomplete information, and ambiguity, we show that the optimal consumption decision of an agent with logarithmic preferences can be separated from the agent's investment decisions. Using minimal assumptions and mathematical machinery, we demonstrate that the optimal consumption/wealth ratio is deterministic, and we derive an explicit formula for it.

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Year of publication:	2013
Authors:	KORN, RALF ; SEIFRIED, FRANK THOMAS
Published in:	International Journal of Theoretical and Applied Finance (IJTAF). - World Scientific Publishing Co. Pte. Ltd., ISSN 1793-6322. - Vol. 16.2013, 06, p. 1350035-1
Publisher:	World Scientific Publishing Co. Pte. Ltd.
Subject:	Consumption-portfolio optimization \| logarithmic preferences \| separation \| myopic decision making

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Extent:	application/pdf text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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