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Article: Robustly Strategic Consumption–Portfolio Rules with Informational Frictions
Title | Robustly Strategic Consumption–Portfolio Rules with Informational Frictions |
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Authors | |
Keywords | Model uncertainty Precautionary savings Rational inattention Robustness Strategic asset allocation Uninsurable labor income |
Issue Date | 2017 |
Publisher | INFORMS. The Journal's web site is located at http://mansci.pubs.informs.org |
Citation | Management Science, 2017, v. 63 n. 12, p. 3999-4446 How to Cite? |
Abstract | This paper provides a tractable continuous-time, constant absolute risk aversion–Gaussian framework to explore how the interactions of fundamental uncertainty, model uncertainty due to a preference for robustness, and state uncertainty due to information-processing constraints (rational inattention) affect strategic consumption–portfolio rules and precautionary savings in the presence of uninsurable labor income. Specifically, after solving the model explicitly, I compute and compare the elasticities of strategic asset allocation and precautionary savings to risk aversion, robustness, and inattention. Furthermore, for plausibly estimated and calibrated model parameters, I quantitatively analyze how the interactions of model uncertainty and state uncertainty affect the optimal share invested in the risky asset and show that they can provide a potential explanation for the observed stockholding behavior of households with different education and income levels. |
Persistent Identifier | http://hdl.handle.net/10722/236445 |
ISSN | 2023 Impact Factor: 4.6 2023 SCImago Journal Rankings: 5.438 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Luo, Y | - |
dc.date.accessioned | 2016-11-25T00:53:30Z | - |
dc.date.available | 2016-11-25T00:53:30Z | - |
dc.date.issued | 2017 | - |
dc.identifier.citation | Management Science, 2017, v. 63 n. 12, p. 3999-4446 | - |
dc.identifier.issn | 0025-1909 | - |
dc.identifier.uri | http://hdl.handle.net/10722/236445 | - |
dc.description.abstract | This paper provides a tractable continuous-time, constant absolute risk aversion–Gaussian framework to explore how the interactions of fundamental uncertainty, model uncertainty due to a preference for robustness, and state uncertainty due to information-processing constraints (rational inattention) affect strategic consumption–portfolio rules and precautionary savings in the presence of uninsurable labor income. Specifically, after solving the model explicitly, I compute and compare the elasticities of strategic asset allocation and precautionary savings to risk aversion, robustness, and inattention. Furthermore, for plausibly estimated and calibrated model parameters, I quantitatively analyze how the interactions of model uncertainty and state uncertainty affect the optimal share invested in the risky asset and show that they can provide a potential explanation for the observed stockholding behavior of households with different education and income levels. | - |
dc.language | eng | - |
dc.publisher | INFORMS. The Journal's web site is located at http://mansci.pubs.informs.org | - |
dc.relation.ispartof | Management Science | - |
dc.subject | Model uncertainty | - |
dc.subject | Precautionary savings | - |
dc.subject | Rational inattention | - |
dc.subject | Robustness | - |
dc.subject | Strategic asset allocation | - |
dc.subject | Uninsurable labor income | - |
dc.title | Robustly Strategic Consumption–Portfolio Rules with Informational Frictions | - |
dc.type | Article | - |
dc.identifier.email | Luo, Y: yluo@econ.hku.hk | - |
dc.identifier.authority | Luo, Y=rp01083 | - |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1287/mnsc.2016.2553 | - |
dc.identifier.scopus | eid_2-s2.0-85038882477 | - |
dc.identifier.hkuros | 270435 | - |
dc.identifier.volume | 63 | - |
dc.identifier.issue | 12 | - |
dc.identifier.spage | 3999 | - |
dc.identifier.epage | 4446 | - |
dc.identifier.isi | WOS:000417712000009 | - |
dc.publisher.place | United States | - |
dc.identifier.issnl | 0025-1909 | - |