@article {Semmler21, author = {Willi Semmler and Lars Gr{\"u}ne and Caroline {\"O}hrlein}, title = {Dynamic Consumption and Portfolio Decisions with Time Varying Asset Returns}, volume = {12}, number = {2}, pages = {21--47}, year = {2009}, doi = {10.3905/jwm.2009.12.2.021}, publisher = {Institutional Investor Journals Umbrella}, abstract = {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{\textquoteright}s risk aversion, the change of returns, and the time horizon are explored for the consumption decisions, the consumption{\textendash}wealth ratio, the asset allocation, and the path of wealth.TOPICS: Portfolio construction, simulations}, issn = {1534-7524}, URL = {https://jwm.pm-research.com/content/12/2/21}, eprint = {https://jwm.pm-research.com/content/12/2/21.full.pdf}, journal = {The Journal of Wealth Management} }