This paper investigates the optimal investment and consumption problem in a continuous-time financial market for investors with power utility on consumption, who face partially hedgeable interest rate risk. With no analytical solution to the optimal strategies, closed-form approximate strategies...

N mutual funds compete for fund flows based on relative performance over their average returns, by choosing between an idiosyncratic and a common risky investment opportunities. The unique constant equilibrium is derived in closed form, which imply that most funds decrease the investments in...

We find optimal trading policies for long-term investors with constant relative risk aversion and constant investment opportunities, which include one safe asset, liquid risky assets, and an illiquid risky asset trading with proportional costs. Access to liquid assets creates a diversification...

When the planning horizon is long, and the safe asset grows indefinitely, iso-elastic portfolios are nearly optimal for investors who are close to iso-elastic for high wealth, and not too risk averse for low wealth. We prove this result in a general arbitrage-free, frictionless, semi-martingale...

This paper proves a class of static fund separation theorems, valid for investors with a long horizon and constant relative risk aversion, and with stochastic investment opportunities. An optimal portfolio decomposes as a constant mix of a few preference-free funds, which are common to all...