Economics, Econometrics and Finance
8 years ago

Investors advised to adjust consumption based on financial situation, study finds.

Mathematical Control and Related Fields
An optimal consumption-investment model with constraint on consumption
Zuo Quan Xu, Fahuai Yi

Paper Summary

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The article discusses a model for small investors to make decisions on how much to spend and invest, while facing limits on spending. The goal is to maximize their long-term happiness from spending. The model suggests that investors should follow a similar investment strategy as in a well-known model, regardless of their financial situation. However, their spending strategy should change based on whether they are in a good or bad financial situation.