RT Journal Article SR Electronic T1 Dynamic Consumption and Portfolio Decisions with Time Varying Asset Returns JF The Journal of Wealth Management FD Institutional Investor Journals SP 21 OP 47 DO 10.3905/jwm.2009.12.2.021 VO 12 IS 2 A1 Willi Semmler A1 Lars Grüne A1 Caroline Öhrlein YR 2009 UL https://pm-research.com/content/12/2/21.abstract AB In this article, the authors study dynamic consumption and portfolio decisions by using dynamic programming that allows them to compute, with sufficient accuracy, the decision variables and the consumption-wealth ratio at any point of the state space. The dynamic decision problem is first analytically and numerically solved for a simple model with constant returns. Then the authors solve a model with dynamic consumption and portfolio decisions when time-varying returns are calibrated from the low-frequency components of U.S. time series financial data. The implications of the change of investor’s risk aversion, the change of returns, and the time horizon are explored for the consumption decisions, the consumption–wealth ratio, the asset allocation, and the path of wealth.TOPICS: Portfolio construction, simulations