Efficient Intertemporal Allocation of Risk and Return

Stanford Graduate School of Business Research Paper Series No. 2055

14 Pages Posted: 14 Jul 2010

See all articles by Robert Wilson

Robert Wilson

Stanford Graduate School of Business

Eiichiro Kazumori

State University of New York; Stanford Graduate School of Business

Date Written: April 1, 2009

Abstract

Efficient allocation of a stochastic stream of financial income is characterized by an explicit stochastic differential equation for the case that each agent has stationary preferences and the probability law of the stochastic process is known. The initial condition is affected by which efficient allocation is chosen, but subsequent evolution is determined solely by agents' impatience and risk aversion.

Keywords: efficient allocation of risk, economic theory, risk

JEL Classification: D53, D61, D70, D86, D91

Suggested Citation

Wilson, Robert B. and Kazumori, Eiichiro, Efficient Intertemporal Allocation of Risk and Return (April 1, 2009). Stanford Graduate School of Business Research Paper Series No. 2055, Available at SSRN: https://ssrn.com/abstract=1639613 or http://dx.doi.org/10.2139/ssrn.1639613

Robert B. Wilson (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
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650-723-8620 (Phone)
650-725-7979 (Fax)

Eiichiro Kazumori

State University of New York ( email )

12 Capen Hall
Buffalo, NY 14260
United States

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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