Portfolio and Consumption Decisions under Mean-Reverting Returns: An Exact Solution for Complete Markets

By Jessica A. Wachter. Journal of Financial and Quantitative Analysis, 2002

576 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/a8a89c2ed4fc5aafb94e64ef5bc3b5f3ea28d9bc

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Citations in the corpus

Optimal Decentralized Investment Management (2008, unknown): “The centralized investment problem with affine prices of risk has been solved by, among others, Liu (2006) and Sangvinatsos and Wachter (2005). We denote the CIO’s investment horizon by τC .”
Optimal Consumption and Investment Strategies with Stochastic Interest Rates (2004, unknown): “This characterization generalizes recent results in specialized Markovian settings (Liu, 1999; Wachter, 2002a).”
What Matters to Individual Investors? Evidence from the Horse's Mouth (2018, unknown): “In a model with intermediate-period consumption, Wachter (2002) shows that the time remaining until a significant non-retirement expense can also affect portfolio risk-taking.”
Portfolios and risk premia for the long run. (2012, unknown): “3Kim and Omberg (1996), Brennan and Xia (2002), Wachter (2002), Munk and Sørensen (2004), Liu (2007), compute optimal portfolios explicitly for certain models.”
Why Do Household Portfolio Shares Rise in Wealth (2010, unknown): “One branch of the literature is motivated by the observation that the consumption Euler equation need not hold for a representative household because only a sub-sample of the population actually own stock (Mankiw and Zeldes, 1991). Moreover, markets may be incomplete or risk aversion may be heteroge”
Correlation Risk and Optimal Portfolio Choice (2010, background): “Brennan, Schwartz, and Lagnado (1997), Barberis (2000), Kim and Omberg (1996), and Wachter (2002) address this issue in the context of time-varying expected re- 22 turns.”
Investment and Valuation Under Backward and Forward Dynamic Exponential Utilities in a Stochastic Factor Model (2007, background): “The excess risky demand is the required investment that emerges from the local in time changes in the Sharpe ratio (see, among others, Kim and Omberg (1996), Liu (1999), Campbell and Viceira (1999), Chacko and Viceira (1999), Wachter (2002) and Campell et al. (2004)).”
Asset Allocation Under Multivariate Regime Switching (2005, unknown): “Finally, some papers have derived closed-form solutions by working in continuous-time, e.g. Kim and Omberg (1996) for the case without interim consumption and Wachter (2002) for the case with interim consumption and complete markets.”
Dynamic asset allocation with stochastic income and interest rates. (2010, unknown): “This would basically call for a combination of our model with a set-up like that considered by Yao and Zhang (2005) and Van Hemert (2009).”
Optimal lifetime consumption-portfolio strategies under trading constraints and generalized recursiv (2003, unknown): “The solution in Wachter (2002) is a special case of Schroder and Skiadas (1999) in the case ofintermediate consumption, and of Liu (2001) in the case ofterminal consumption.”
Heterogeneity and Portfolio Choice: Theory and Evidence (2004, background): “3.2 Time Variation in Returns Barberis (2000), Campbell and Viciera (1999), Kandel and Stambaugh (1996), Nielsen and Vassalou (2002), Wachter (2002), and Xia (2001), among others, study dynamic models of optimal portfolio choice in the face of time variation in the distribution of asset returns.”
Robust Portfolio Rules and Asset Pricing (2004, background): “The intuition from (59) and the discussion of the riskfree rate in this framework gives some hope.”
Dynamic asset allocation under mean-reverting returns, stochastic interest rates, and inflation uncertainty: Are popular recommendations consistent with rational behavior? (2004, methodology): “The first term generalizes a similar expression in Wachter (2002).”