Holdout behaviour: a question of diversification, risk aversion and expectation

Wolfgang Eggert, Maximilian Stephan, Janine Temme and Handirk von Ungern-Sternberg

Applied Economics Letters, 2016, vol. 23, issue 9, 623-626

Abstract: We argue a holdout is not a destructive investor behaviour but an investment decision. The decision is characterized by the mean-variance approach. We investigate intercreditor conflict by diverse portfolio structure. We demonstrate that at some point during the Greek (2012) and Argentine (2005) debt restructuring programmes, it was reasonable for the investor to hold out. This model shows that the investment decision is based on the portfolio structure, risk aversion and expected possible payment of the debtor, so there is no free-rider behaviour. This is based on the fact that the investor harms herself due to destructive and uncooperative behaviour.

Date: 2016
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DOI: 10.1080/13504851.2015.1093078

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