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Liquidity Preference and Information

Sandeep Kapur

No 1008, Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics

Abstract: This paper explores the link between anticipated information and a preference for liquidity in investment choices. Given a subjective ordering of investment portfolios by their liquidity, we identify a sufficient condition under which the prospect of finer resolution of uncertainty creates a preference for more liquid positions. We then show how this condition might arise naturally in some standard classes of sequential decision problems.

Date: 2010-03
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https://eprints.bbk.ac.uk/id/eprint/7547 First version, 2010 (application/pdf)

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