Intertemporal Resolution of Uncertainty and Portfolio Behavior |
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| Authors: | Devinder K Gandhi Muhammad Rashid Kenneth D Riener |
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| Institution: | University of Ottawa, Ottawa, Ontario K1N 6N5 Canada.;University of New Brunswick, Fredericton, New Brunswick E3B 5A3 Canada.;California Polytechnic State University, San Luis Obispo, CA 93407. We are grateful to two anonymous referees for their valuable and helpful comments. |
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| Abstract: | In this paper, it is shown that the early resolution of uncertainty improves the welfare of an investor who has utility defined over his intertemporal consumption. This result arises because the early resolution of uncertainty permits the investor the additional flexibility of rearranging his initial consumption. In contrast, if the investor has utility for terminal wealth, there is no effect on his portfolio behavior from the early resolution of uncertainty. |
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