Information , Expected Utility , and Portfolio Choice

  title={Information , Expected Utility , and Portfolio Choice},
  author={Jun Liu and Ehud Peleg and Avanidhar Subrahmanyam},
Information, Expected Utility, and Portfolio Choice We study the consumption-investment problem of an agent with a constant relative risk aversion preference function, who possesses information about the future prospects of a stock. We also solve for the value of information to the agent in closed-form. We find that information can significantly alter consumption and asset allocation decisions. For reasonable parameter ranges, information increases consumption in the vicinity of 25… CONTINUE READING