Defining bad news: Changes in return distribution that decrease risky asset demand

Burton Hollifield () and Alan Kraus

No 2007-E32, GSIA Working Papers from Carnegie Mellon University, Tepper School of Business

Abstract: We provide a random variable characterization of the necessary and sufficient conditions for a shift of the distribution of rate of return on the risky asset in the two asset portfolio problem to reduce demand for all risk--averse expected utility maximizing investors. We provide random variable characterizations of the shifts that reduce both demand and expected utility for all risk--averse investors and a random variable characterization of shifts in the payoff of the market portfolio that reduce the equilibrium price of the market portfolio and make all risk--investors worse off.

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Journal Article: Defining Bad News: Changes in Return Distributions That Decrease Risky Asset Demand (2009)
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