Non-diversified portfolios with subjective expected utility

Christopher Chambers and Georgios Gerasimou

Papers from arXiv.org

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.

Date: 2023-04, Revised 2024-10
New Economics Papers: this item is included in nep-mac, nep-mic, nep-rmg and nep-upt
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Journal Article: Non-diversified portfolios with subjective expected utility (2024)
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