Optimal consumption and portfolio rules with durability and local substitution
Article Abstract:
A model of optimal consumption and portfolio choice is analyzed. The model focuses on two interpretations of local substitution and durable goods purchases. Heuristically necessary and sufficient conditions are set for the establishment of optimal consumption and portfolio policy. Results show that optimal consumption policy is directed by an initial 'gulp' stage or the absence of consumption, followed by cumulative consumption with singular sample paths.
Publication Name: Econometrica
Subject: Mathematics
ISSN: 0012-9682
Year: 1993
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Sufficient conditions for inessentiality
Article Abstract:
An analysis of sufficient conditions for market inessentiality is presented. Markets are established such that small agents trade event-contingent claims for a specific physical good. It is shown that an equilibrium is inessential ifagents develop alternative optimal plans for market clearing which have no negative impact and do not require future trading. Inessentiality theorems do not consider ex ante pareto optimum or absent arbitrage opportunities.
Publication Name: Econometrica
Subject: Mathematics
ISSN: 0012-9682
Year: 1993
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