Browse > Article
http://dx.doi.org/10.12941/jksiam.2012.16.2.107

OPTIMAL CONSUMPTION AND SLUTSKY EQUATION WITH EPSTEIN-ZIN TYPE PREFERENCE  

Ahn, Se-Ryoong (Department of Business Administration, Ajou University)
Koo, Hyeng-Keun (Department of Financial Engineering, Ajou University)
Publication Information
Journal of the Korean Society for Industrial and Applied Mathematics / v.16, no.2, 2012 , pp. 107-124 More about this Journal
Abstract
In this paper we conduct comparative statics for optimal consumption and portfolio selection of an agent who has a utility function of Epstein and Zin type. We derive the Slutsky equations and decompose the total effects of changes into the substitution effects and the income effects. We identify the role of the elasticity of intertemporal substitution and the coefficient of relative risk aversion.
Keywords
Optimal consumption; Slutsky equation; Epstein-Zin utility;
Citations & Related Records
연도 인용수 순위
  • Reference
1 G. Bierwag and M. Grove, Slutsky Equations for Assets, Journal of Political Economy, 76 (1968), 114-126.   DOI   ScienceOn
2 A. Sandmo, Capital Risk, Consumption and Portfolio Choice, Econometrica, 37 (1969), 586-599.   DOI   ScienceOn
3 A. Sandmo, Portfolio Theory, Asset Dynamics and Taxation: Comparative Statics with Many Assets, The Review of Economic Studies, 44 (1977), 369-379.   DOI   ScienceOn
4 S. Fischer, Assets, Contingent Commodities, and the Slutsky Equations, Econometrica, 40 (1972), 371-385.   DOI   ScienceOn
5 A. Dalal, Comparative Statics and Asset Substitutability/Complementarity in a Portfolio Model: A Dual Approach, The Review of Economic Studies, 50 (1983), 355-367.   DOI   ScienceOn
6 T. Eichner, Mean Variance Vulnerability, Management Science, 54 (2008), 586-593.   DOI   ScienceOn
7 T. Eichner, Portfolio Selection and Duality under Mean Variance Preferences, Insurance: Mathematics and Economics, 48 (2011), 146-152.   DOI   ScienceOn
8 L. Epstein and S. Zin, Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework, Econometrica, 57 (1989), 937-969.   DOI   ScienceOn
9 P. Cook, A 'One Line' Proof of the Slutsky Equation, American Economic Review, 62 (1972), 139.
10 G. Pye, Portfolio Selection and Security Prices, Review of Economics and Statistics, 49 (1967), 111-115.   DOI   ScienceOn