Markets Do Not Select For a Liquidity Preference as Behavior Towards Risk

Thorsten Hens and Klaus Schenk-Hoppé
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Thorsten Hens: University of Zürich

No 02-18, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: Tobin (1958) has argued that in the face of potential capital losses on bonds it is reasonable to hold cash as a means to transfer wealth over time. It is shown that this assertion cannot be sustained taking into account the evolution of wealth of cash holders versus non cash holders. Cash holders will be driven out of the market in the long run by traders who only use a (risky) long-lived asset to transfer wealth.

Keywords: demand for money; portfolio theory; evolutionary finance (search for similar items in EconPapers)
JEL-codes: D81 E41 G11 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2002-12
New Economics Papers: this item is included in nep-fin and nep-fmk
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.econ.ku.dk/english/research/publications/wp/2002/0218.pdf/ (application/pdf)

Related works:
Journal Article: Markets do not select for a liquidity preference as behavior towards risk (2006)
Working Paper: Markets Do Not Select For a Liquidity Preference as Behavior Towards Risk
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:0218

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