Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets

@inproceedings{Chacko2003DynamicCA,
  title={Dynamic Consumption and Portfolio Choice with Stochastic Volatility in Incomplete Markets},
  author={George Chacko and Luis M. Viceira},
  year={2003}
}
This paper examines the optimal consumption and portfolio choice problem of long-horizon investors who have access to a riskless asset with constant return and a risky asset ("stocks") with constant expected return and time varying precision–the reciprocal of volatility. Markets are incomplete, and investors have recursive preferences defined over intermediate consumption. The paper obtains a solution to this problem which is exact for investors with unit elasticity of intertemporal… CONTINUE READING
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