Essays on uncertainty and allocation over time

1970

This paper is concerned with the interaction of

saving and portfolio decisions of a single consumer.

Its building blocks are the classical theory of optimal

allocation over time, and Arrow's recent formulation of

the theory of portfolio selection. The concept of a

risk aversion function is extended to a two-period

context, and the implications of declining risk

aversion are explored. Also discussed are the problems

of the effect of changes in the rates of return and in

the degree of risk, as well as the question of taxation

and risk-taking.

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