English, Article, Journal or magazine article edition: Investment, Income, and Incompleteness Björn Bick; Holger Kraft; Claus Munk

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Bookmark: http://trove.nla.gov.au/version/1726
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Investment, Income, and Incompleteness
Author
  • Björn Bick
  • Holger Kraft
  • Claus Munk
Physical Description
  • preprint
Notes
  • The utility-maximizing consumption and investment strategy of an individual investor receiving an unspanned labor income stream seems impossible to nd in closed form and very difficult to nd using numerical solution techniques. We suggest an easy procedure for nding a specic, simple, and admissible consumption and investment strategy, which is near-optimal in the sense that the wealth equivalent loss compared to the unknown optimal strategy is very small. We first explain and implement the strategy in a simple setting with constant interest rates, a single risky asset, and an exogenously given income stream, but we also show that the success of the strategy is robust to changes in parameter values, to the introduction of stochastic interest rates, and to endogenous labor supply decisions.
  • RePEc:fra:franaf:202
Language
  • English
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