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Mean-variance-utility portfolio selection with time and state dependent risk aversion

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  • Ben-Zhang Yang
  • Xin-Jiang He
  • Song-Ping Zhu

Abstract

Under mean-variance-utility framework, we propose a new portfolio selection model, which allows wealth and time both have influences on risk aversion in the process of investment. We solved the model under a game theoretic framework and analytically derived the equilibrium investment (consumption) policy. The results conform with the facts that optimal investment strategy heavily depends on the investor's wealth and future income-consumption balance as well as the continuous optimally consumption process is highly dependent on the consumption preference of the investor.

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  • Ben-Zhang Yang & Xin-Jiang He & Song-Ping Zhu, 2020. "Mean-variance-utility portfolio selection with time and state dependent risk aversion," Papers 2007.06510, arXiv.org, revised Aug 2020.
    • Handle: RePEc:arx:papers:2007.06510
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    References listed on IDEAS

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