Optimal consumption and investment under relative performance citeria with Epstein-Zin utility

Jodi Dianetti, Frank Riedel, and Lorenzo Stanza

We consider the strategic interaction of traders in a continuous-time financial market with Epstein-Zin-type recursive intertemporal preferences and performance concerns. We derive explicitly an equilibrium for the finite player and the mean-field version of the game, based on a study of geometric backward stochastic differential equations of Bernoulli type that describe the best replies of traders. Our results show that Epstein-Zin preferences can lead to substantially different equilibrium behavior.

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Year of publication:	[2024]
Authors:	Dianetti, Jodi ; Riedel, Frank ; Stanza, Lorenzo
Publisher:	Bielefeld, Germany : Center for Mathematical Economics (IMW), Bielefeld University
Subject:	Mean field games \| portfolio choice \| recursive utility \| stochastic differential utility \| BSDEs \| Portfolio-Management \| Portfolio selection \| Theorie \| Theory \| Nutzen \| Utility \| Nutzenfunktion \| Utility function \| Risiko \| Risk