The Merton problem with hyperbolic discounting

Friday, June 11, 2010 - 2:00pm - 3:30pm
Lind 305
Ivar Ekeland (University of British Columbia)
There is strong evidence that individuals discount future utilities at non-constant rates. The notion of optimality then disappears, because of time inconsistency (see the Tuesday colloquium) and rational behaviour then centers around equilibrium strategies. I will investigate portfolio management with hyperbolic discounting (the discount rate increases with time), and I will show that this may explain some well-known puzzles of portfolio management. This is joint work with Traian Pirvu.
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