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

Thorsten Hens and Klaus Reiner Schenk-Hopp�
Authors registered in the RePEc Author Service: Klaus Reiner Schenk-Hoppé

No 139, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

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)
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (3)

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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 (2002)
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