An optimal job,consumption/leisure,and investment policy |
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Authors: | Gyoocheol Shim Yong Hyun Shin |
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Institution: | 1. Department of Financial Engineering, Ajou University, Suwon 443749, Republic of Korea;2. Department of Mathematics, Sookmyung Women’s University, Seoul 140742, Republic of Korea |
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Abstract: | In this paper we investigate an optimal job, consumption, and investment policy of an economic agent in a continuous and infinite time horizon. The agent’s preference is characterized by the Cobb–Douglas utility function whose arguments are consumption and leisure. We use the martingale method to obtain the closed-form solution for the optimal job, consumption, and portfolio policy. We compare the optimal consumption and investment policy with that in the absence of job choice opportunities. |
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Keywords: | Job choice Consumption Leisure Portfolio selection Martingale method |
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