Optimal consumption-portfolio choices and retirement planning [An article from: Journal of Economic Dynamics and Control]

This digital document is a journal article from Journal of Economic Dynamics and Control, published by Elsevier in 2004. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
We examine consumption and investment decisions in a life-cycle model with habit formation, stochastic opportunity set, stochastic wages and labor supply flexibility. Retirement is taken into account by specifying an age at which labor earnings stop, but consumption spending continues. Explicit solutions are obtained for optimal consumption, labor supply and the financing portfolio. We examine the structure and determinants of the optimal portfolio. We also study the effects of the retirement date and of habits on optimal decisions. Finally, we conduct a preliminary analysis to assess the effects of a liquidity constraint on optimal consumption-leisure choices.