Optimal multi-period consumption and investment with short-sale constraints
Author
Arısoy, Y. E.
Altay-Salih, A.
Pınar, M. Ç.
Date
2014-03Source Title
Finance Research Letters
Print ISSN
1544-6123
Publisher
Elsevier
Volume
11
Issue
1
Pages
16 - 24
Language
English
Type
ArticleItem Usage Stats
134
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Abstract
This article examines agents’ consumption-investment problem in
a multi-period pure exchange economy where agents are constrained
with the short-sale of state-dependent risky contingent
claims. In equilibrum, agents hold options written on aggregate
consumption in their optimal portfolios. Furthermore, under the
specific case of quadratic utility, the optimal risk-sharing rule
derived for the pricing agent leads to a multifactor conditional consumption-based
capital asset pricing model (CCAPM), where
excess option returns appear as factors.