Optimal consumption and investment strategies with partial and private information in a multi-asset setting

Information is crucial for decision makers. The more and the better information one possesses, the more qualified a decision one is able to make. In a framework with partial information about the expected returns of n stocks, the effect of having either non-anticipative or anticipative private information is studied. Optimal consumption and investment strategies for investors exhibiting constant relative risk aversion are derived analytically and an economically intuitive condition for an investor to be indifferent between the two types of private information is given. Moreover, a detailed numerical study including the value of private information is carried out to obtain a better economic understanding of the interplay between partial and private information. One novel result is that intertemporal consumption motives decrease the incentive of an investor to acquire private information.