Abstract
We consider the continuous time consumption-investment problem originally formalized and solved by Merton in case of constant relative risk aversion. We present a complete solution for the case where relative risk aversion with respect to consumption varies with time, having in mind an investor with age-dependent risk aversion. This provides a new motivation for life-cycle investment rules. We study the optimal consumption and investment rules, in particular in the case where the relative risk aversion with respect to consumption is increasing with age.
| Originalsprog | Engelsk |
|---|---|
| Tidsskrift | Journal of Economic Dynamics and Control |
| Vol/bind | 35 |
| Udgave nummer | 5 |
| Sider (fra-til) | 659-667 |
| ISSN | 0165-1889 |
| Status | Udgivet - maj 2011 |