Defining bad news: Changes in return distributions that decrease risky asset demand

Defining bad news: Changes in return distributions that decrease risky asset demand

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Article ID: iaor200969117
Country: United States
Volume: 55
Issue: 7
Start Page Number: 1227
End Page Number: 1236
Publication Date: Jul 2009
Journal: Management Science
Authors: ,
Keywords: risk
Abstract:

We provide a random variable characterization of the necessary and sufficient conditions for a shift of the distribution of rate of return on the risky asset in the two-asset portfolio problem to reduce demand for all strictly risk-averse expected-utility-maximizing investors. We also provide random variable characterizations of the shifts that reduce both demand and expected utility for all strictly risk-averse investors.

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