Optimal Investment Consumption Choices under Mispricing and Habit Formation

doi:10.3390/math12142248

	Optimal Investment Consumption Choices under Mispricing and Habit Formation
	Shi, Ailing 1; Sun, Jingyun2 ; Liu, Botao 3,4
	2024-07
发表期刊	MATHEMATICS
卷号	12 期号:14
摘要	This paper studies the optimal consumption and investment for an agent, considering statistical arbitrary opportunities caused by mispriced stocks. The agent exhibits consumption habit formation and has access to a risk-free asset, a market index, and a pair of mispriced stocks. The optimization problem is to find the optimal consumption and investment strategies to maximize the expected utility from consumption and terminal wealth. The utility of consumption stems from the difference between the consumption and habit levels. Based on the dynamic programming method, a verification theorem is provided, and the analytical solution of the optimization problem is obtained. The numerical results show the behaviors of our formulas and are used to make practical recommendations. By studying the sensitivity of consumption and investment strategies to habit formation, mispricing, and a delta-neutral arbitrage strategy, we uncover and analyze the behaviors of the agent. Meanwhile, we define and discuss the wealth-equivalent utility loss in three cases, including ignoring habit formation, ignoring mispricing, and adopting the delta-neutral arbitrage strategy.
关键词	habit formation mispricing optimal strategies utility loss financial market
DOI	10.3390/math12142248
收录类别	SCIE
语种	英语
WOS研究方向	Mathematics
WOS类目	Mathematics
WOS记录号	WOS:001277708300001
出版者	MDPI
原始文献类型	Article
EISSN	2227-7390
引用统计	被引频次[WOS]：0 [WOS记录] [WOS相关记录]
文献类型	期刊论文
条目标识符	http://ir.lzufe.edu.cn/handle/39EH0E1M/37597
专题	统计与数据科学学院
通讯作者	Liu, Botao
作者单位	1.Lanzhou Univ Arts & Sci, Sch Educ, Lanzhou 730010, Peoples R China; 2.Lanzhou Univ Finance & Econ, Ctr Quantitat Anal Gansu Econ Dev, Lanzhou 730020, Peoples R China; 3.Lanzhou Univ, Sch Math & Stat, Lanzhou 730010, Peoples R China; 4.Xinjiang Normal Univ, Sch Math Sci, Urumqi 830017, Peoples R China
推荐引用方式 GB/T 7714	Shi, Ailing,Sun, Jingyun,Liu, Botao. Optimal Investment Consumption Choices under Mispricing and Habit Formation[J]. MATHEMATICS,2024,12(14).
APA	Shi, Ailing,Sun, Jingyun,&Liu, Botao.(2024).Optimal Investment Consumption Choices under Mispricing and Habit Formation.MATHEMATICS,12(14).
MLA	Shi, Ailing,et al."Optimal Investment Consumption Choices under Mispricing and Habit Formation".MATHEMATICS 12.14(2024).