Non-diversified portfolios with subjective expected utility

Christopher Chambers and Georgios Gerasimou

Economics Letters, 2024, vol. 244, issue C

Abstract: Diversification is the typical investment strategy of risk-averse agents. However, non-diversified positions that allocate all resources to a single asset, state of the world or revenue stream are common too. We show that whenever finitely many non-diversified demands under uncertainty are compatible with risk-averse subjective expected utility maximization under strictly positive beliefs, they are also rationalizable under the same beliefs by many qualitatively distinct risk-averse as well as risk-neutral and risk-seeking preferences.

Keywords: Investment under uncertainty; Non-diversification; Subjective expected utility; Demand; Revealed preference (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524005202

DOI: 10.1016/j.econlet.2024.112036

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