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2025-05-28 07:38:14

Martingale Consumption
Peter Holm Nielsen
https://arxiv.org/abs/2505.20504 https://arxiv.org/pdf/2505.20504

Martingale Consumption
We propose martingale consumption as a natural, desirable consumption pattern for any given (proportional) investment strategy. The idea is to always adjust current consumption so as to achieve level expected future consumption under the arbitrarily chosen investment strategy. This approach avoids the formulation of an optimization objective based on preferences towards risk, intertemporal consumption, habit formation etc. We identify general explicit solutions in deterministic-coefficient mode…