Adding Risks: Some General Results about Time Diversification

Kin Lam and Liang Zou ()
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Kin Lam: Hong Kong Baptist University
Liang Zou: University of Amsterdam

No 00-063/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We show in general that risky investments become more attractive asthe investment horizon (n) lengthens.Specifically, any investor's maximal expected utility directlyincreases with n, as well as the investor's willingness toallocate more capital to the risky assets if his optimal strategy isbounded by the leverage constraint.

Keywords: Time diversification; expected utility; long-term capital allocation (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2000-07-31
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20000063

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