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Entrepreneurial Optimal Investment, Consumption and Pricing
YANG Jin-qiang 1,2, YANG Zhao-jun 1, SHI Feng 1,3
(1.School of Finance and Statistics, Hunan University, Changsha 410079, China;2.School of Finance, Shanghai University of Finance and Economics, Shanghai 200433, China;3.School of Economics and Management, Beijing Institute of Petrochemical Technology, Beijing 100026, China)
Abstract The authors consider the corporate finance problem of how an entrepreneur facing stochastic market risk realizes consumption utility maximization through consumption, risk management and costly dynamic adjustment of the scale of capital asset. Utilizing dynamic stochastic control, the authors derive the semi-closed solutions to the average value and marginal value of the capital in incomplete market and non risk neutral enterprises and the corresponding optimal management strategies. Based on CAPM, the authors obtained the expected return rate of entrepreneurs, the beta coefficient and risk premium of enterprises. The numeric results show that in an incomplete market, the risk attitude of entrepreneurs has significant effect on the value of corporate capital, beta coefficient, risk premium, expected return rate and the corresponding optimal management strategies
2011, Vol. 28 
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