Consumption/investment problem when the investment opportunity set can be enlarged by information gathering

Consumption/investment problem when the investment opportunity set can be enlarged by information gathering

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Article ID: iaor20117384
Volume: 39
Issue: 4
Start Page Number: 283
End Page Number: 288
Publication Date: Jul 2011
Journal: Operations Research Letters
Authors:
Keywords: information
Abstract:

I investigate an optimal information gathering and consumption/investment choice of an investor who can find a better opportunity by an information gathering option. I obtain a closed form solution, under which, the investor gathers information as soon as his wealth exceeds a certain critical level, consumes less and takes more risk than he would in the absence of such an option.

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