Expected Life-Time Utility and Hedging Demands in a Partially Observable Economy
(2008) In European Economic Review 52(6). p.1072-1096- Abstract
- This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor's expected life-time utility, and analyze his hedging demands for intertemporal changes in the stochastic unobservable growth of the endowment process and the changing quality of information regarding these changes. The hedging demands consist of two components, which could work in opposite directions so that a conservative consumer may end up having positive hedging demands. Our results are qualitatively different from those prevailing under constant growth (cf. [Brennan, M.J., 1998. The role of learning in dynamic portfolio... (More)
- This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor's expected life-time utility, and analyze his hedging demands for intertemporal changes in the stochastic unobservable growth of the endowment process and the changing quality of information regarding these changes. The hedging demands consist of two components, which could work in opposite directions so that a conservative consumer may end up having positive hedging demands. Our results are qualitatively different from those prevailing under constant growth (cf. [Brennan, M.J., 1998. The role of learning in dynamic portfolio decisions. European Finance Review, 1, 295–306; Ziegler, A., 2003. Incomplete Information and Heterogeneous Beliefs in Continuous-Time Finance. Springer, Berlin, Chapter 2]. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/1384490
- author
- Lundtofte, Frederik LU
- organization
- publishing date
- 2008
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Learning, Incomplete information, Equilibrium, Hed
- in
- European Economic Review
- volume
- 52
- issue
- 6
- pages
- 1072 - 1096
- publisher
- Elsevier
- external identifiers
-
- wos:000259466200007
- scopus:49349114120
- ISSN
- 1873-572X
- DOI
- 10.1016/j.euroecorev.2007.09.003
- language
- English
- LU publication?
- yes
- id
- 08624198-fa39-4626-86d0-eca6288b5ae4 (old id 1384490)
- date added to LUP
- 2016-04-04 14:18:55
- date last changed
- 2022-03-16 03:10:01
@article{08624198-fa39-4626-86d0-eca6288b5ae4,
abstract = {{This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor's expected life-time utility, and analyze his hedging demands for intertemporal changes in the stochastic unobservable growth of the endowment process and the changing quality of information regarding these changes. The hedging demands consist of two components, which could work in opposite directions so that a conservative consumer may end up having positive hedging demands. Our results are qualitatively different from those prevailing under constant growth (cf. [Brennan, M.J., 1998. The role of learning in dynamic portfolio decisions. European Finance Review, 1, 295–306; Ziegler, A., 2003. Incomplete Information and Heterogeneous Beliefs in Continuous-Time Finance. Springer, Berlin, Chapter 2].}},
author = {{Lundtofte, Frederik}},
issn = {{1873-572X}},
keywords = {{Learning; Incomplete information; Equilibrium; Hed}},
language = {{eng}},
number = {{6}},
pages = {{1072--1096}},
publisher = {{Elsevier}},
series = {{European Economic Review}},
title = {{Expected Life-Time Utility and Hedging Demands in a Partially Observable Economy}},
url = {{http://dx.doi.org/10.1016/j.euroecorev.2007.09.003}},
doi = {{10.1016/j.euroecorev.2007.09.003}},
volume = {{52}},
year = {{2008}},
}