Who would invest only in the risk-free asset?
S. Z. Xanthopoulos () and
A. N. Yannacopoulos ()
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N. Azevedo: Financial Stability Department, Banco de Portugal, Rua Castilho, 24, Lisboa, Portugal2School of Economics and Management, Universidade do Minho, Braga, Portugal
D. Pinheiro: Department of Mathematics, Brooklyn College of the City University of New York, Brooklyn, NY 11210, USA4Department of Mathematics, The Graduate Center of the City University of New York, New York, NY 10016, USA
S. Z. Xanthopoulos: Department of Statistics and Actuarial-Financial Mathematics, University of the Aegean, Samos, Greece
A. N. Yannacopoulos: Department of Statistics and Laboratory of Stochastic Modelling and Applications, Athens University of Economics and Business, Athens, Greece
International Journal of Financial Engineering (IJFE), 2018, vol. 05, issue 03, 1-14
Within the setup of continuous-time semimartingale financial markets, we show that a multiprior Gilboa–Schmeidler minimax expected utility maximizer forms a portfolio consisting only of the riskless asset if and only if among the investor’s priors there exists a probability measure under which all admissible wealth processes are supermartingales. Furthermore, we show that under a certain attainability condition (which is always valid in finite or complete markets) this is also equivalent to the existence of an equivalent (local) martingale measure among the investor’s priors. As an example, we generalize a no betting result due to Dow and Werlang.
Keywords: Martingale measures; portfolio optimization; robust utility (search for similar items in EconPapers)
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