A Stochastic Model of Dynamic Consumption and Portfolio Decisions

Semmler W, Mueller M (2016)
Computational Economics 48(2): 225-251.

Zeitschriftenaufsatz | Veröffentlicht| Englisch
 
Download
Es wurde kein Volltext hochgeladen. Nur Publikationsnachweis!
Autor/in
Semmler, WilliUniBi; Mueller, Maik
Abstract / Bemerkung
This paper sets out a basic framework for solving a stochastic portfolio problem using dynamic programming (DP). Dynamic portfolio decisions are concerned with simultaneous decisions on savings and asset allocation whereby asset returns, such as on equity and bonds, are stochastic as in Campbell and Viceira (Strategic asset allocation, portfolio choice for long-term investors, 2002). In contrast to CV (2002) we do not use a local approximation method to solve the stochastic model but rather use a global solution procedure such as DP. Whereas CV (2002) solve their model by assuming a constant consumption-wealth ratio and equity premium, we can allow both to be time varying. Different variances of equity and bond returns are explored in their impact on saving and asset allocation decisions and on the value function. The stochastic dynamic portfolio decision method proposed here allows for online decisions as data on asset returns are available in real time. The method is set up in a way such that it also helps to make fund decisions online for various types of investment opportunities.
Stichworte
Dynamic programming; Dynamic portfolio; Impact of risk on portfolio; decisions
Erscheinungsjahr
2016
Zeitschriftentitel
Computational Economics
Band
48
Ausgabe
2
Seite(n)
225-251
ISSN
0927-7099
eISSN
1572-9974
Page URI
https://pub.uni-bielefeld.de/record/2916710

Zitieren

Semmler W, Mueller M. A Stochastic Model of Dynamic Consumption and Portfolio Decisions. Computational Economics. 2016;48(2):225-251.
Semmler, W., & Mueller, M. (2016). A Stochastic Model of Dynamic Consumption and Portfolio Decisions. Computational Economics, 48(2), 225-251. doi:10.1007/s10614-015-9517-4
Semmler, W., and Mueller, M. (2016). A Stochastic Model of Dynamic Consumption and Portfolio Decisions. Computational Economics 48, 225-251.
Semmler, W., & Mueller, M., 2016. A Stochastic Model of Dynamic Consumption and Portfolio Decisions. Computational Economics, 48(2), p 225-251.
W. Semmler and M. Mueller, “A Stochastic Model of Dynamic Consumption and Portfolio Decisions”, Computational Economics, vol. 48, 2016, pp. 225-251.
Semmler, W., Mueller, M.: A Stochastic Model of Dynamic Consumption and Portfolio Decisions. Computational Economics. 48, 225-251 (2016).
Semmler, Willi, and Mueller, Maik. “A Stochastic Model of Dynamic Consumption and Portfolio Decisions”. Computational Economics 48.2 (2016): 225-251.