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THE MOSSIN-SAMUELSON MODEL
INTRODUCTION
The Mossin (1968)-Samuelson (1969) (MS) model is a stylized dynamic investment model of great historical importance to financial theory and practice. Its impact is due to its clear but counterintuitive result: that investors should not become more cautious as they approach retirement.
Mossin extended his basic result to special cases involving a risk-free asset with a zero or nonzero unvarying interest rate. Hakansson (1971) reports bugs in some of Mossin’s results and provides some generalizations. We will not recount these cases here. Our interest is in the basic result and its applications. More generally we consider only a small fraction of the enormous literature on stylized financial models, ...
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