IDEAS home Printed from https://ideas.repec.org/a/taf/lstaxx/v53y2024i14p4991-5002.html
   My bibliography  Save this article

Robust consumption for individuals with pessimistic survival beliefs

Author

Listed:
  • Xuejiao Chen
  • Peng Li
  • Ming Zhou
  • Bing Liu

Abstract

As some literature reveal, young people generally keeps pessimistic survival beliefs, and individuals usually make decisions based on their expectations instead of the experience data. Motivated by this idea, we study the optimal consumption problem for individuals with ambiguity aversion about their mortality. Closed-form robust consumption policy before retirement is obtained by solving the HJB equation by employing the dynamic programming principle. The result tells us that pessimistic survival beliefs, together with interest rate, risk attitude, and expectations for the retirement, play an important role on the consumption and saving decision-making. Reducing interest rates can promote consumption, but the impact is not significant. Both mortality and risk aversion level have significant impacts on the consumption. Too much pessimistic survival beliefs or too much low risk aversion level would lead to overconsumption.

Suggested Citation

  • Xuejiao Chen & Peng Li & Ming Zhou & Bing Liu, 2024. "Robust consumption for individuals with pessimistic survival beliefs," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 53(14), pages 4991-5002, April.
    • Handle: RePEc:taf:lstaxx:v:53:y:2024:i:14:p:4991-5002
    DOI: 10.1080/03610926.2023.2198659
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/03610926.2023.2198659
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/03610926.2023.2198659?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:lstaxx:v:53:y:2024:i:14:p:4991-5002. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/lsta .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.