Portfolio Choice with Uncertain Consumption Prices: a mean-variance approch

This paper presents a mean-variance model of portfolio choice and asset pricing when the price of consumption goods as well as the return to assets is uncertain. The correlation of an assets return with purchases at expected prices is shown to reduce both the mean return and the variance of the return of an asset. A numerical approximation is computed to check the accuracy of the mean and variance approximation. Uncertainty of consumption prices is shown to result in long (or speculative) futures holding.


Issue Date:
1980-12
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/37852
Total Pages:
19
Series Statement:
CUDARE Working Paper
158




 Record created 2017-04-01, last modified 2017-08-25

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