We propose a long term portfolio management method which takes into account a liability. Our approach is based on the LQG (Linear, Quadratic cost, Gaussian) control problem framework and then the optimal portfolio strategy hedges the liability by directly tracking a benchmark process which...

This paper analyzes the changes in wealth inequality between college graduates and high-school graduates. The college/high-school net worth gap first narrows from 1989 to 1995 but then increases to the 1989 level thereafter. The wealth gap and income gap seem closely related, as some stylized...

The paper generalizes the Grossman and Laroque (1990) model of optimal consumption and portfolio allocation in the context in which a durable good (or house) subject to adjustment costs is both an argument of the utility function and a component of wealth. Because the Grossman and Laroque model...