Habit Formation from Correlation Aversion

• 成果类型: Article
• 署名作者: Lichtendahl, Kenneth C., Jr.; Chao, Raul O.; Bodily, Samuel E.
• 署名单位: University of Virginia
• 刊物名称: OPERATIONS RESEARCH
• ISSN/ISSBN: 0030-364X
• DOI: 10.1287/opre.1120.1046
• 发表日期: 2012
• 页码: 625-637
• 关键词: intertemporally dependent preferences; lifetime portfolio selection; utility-functions; continuous-time; decision-analysis; consumption; RISK; MODEL; INDEPENDENCE; CONSEQUENCES

摘要

Making plans about how much to consume and how much to invest in risky assets over an uncertain lifetime is a fundamental economic challenge. The leading models of this planning problem use either additive or habit-forming preferences. For the most part, these models assume an individual is either correlation neutral or correlation seeking in consumption, respectively. In this paper, we introduce two habit-forming, correlation-averse preference models. With these preferences, we find closed-form solutions to the classic consumption and portfolio planning problem. Our solutions recommend that a correlation-averse decision maker follow a habit in their consumption plans. While such habits traditionally have been associated with correlation-seeking preferences, our model leads to consumption habits from correlation-averse preferences.