Consumption and Investment Portfolio Problem Under Distributional Uncertainty Using Bayesian Methods
Year: 2025
Type: article
Abstract: In complex markets, limited information makes it difficult for investors to accurately estimate true distribution of the risky asset return, which reducing model robustness. This paper focuses on the consumption investment problem under risky asset return distributional uncertainty. By integrating distributional uncertainty with Bayesian methods, the paper constructs a robust model. Using the Minimax principle and dynamic programming, the paper derives explicit solution strategies under the CARA utility function by solving a minimax optimization problem. Empirical analysis verifies the rationality and effectiveness of the proposed model.
Authors: Zhen Yan, Peibiao Zhao
Institution: Nanjing University of Science and Technology
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4409206622