Risk aversion and allocation to long-term bonds

• 成果类型: Article
• 署名作者: Wachter, JA
• 署名单位: New York University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/S0022-0531(03)00062-0
• 发表日期: 2003
• 页码: 325-333
• 关键词: Risk aversion; portfolio choice; state-price density

摘要

As risk aversion approaches infinity, the portfolio of an investor with utility over consumption at time T is shown to converge to the portfolio consisting entirely of a bond maturing at time T. Previous work on bond allocation requires a specific model for equities, the term structure, and the investor's utility function. In contrast, the only substantive assumption required for the analysis in this paper is that markets are complete. The result, which holds regardless of the underlying investment opportunities and the utility function, formalizes the preferred habitat intuition of Modigliani and Sutch (Amer. Econom. Rev. 56 (1966) 178). (C) 2003 Elsevier Inc. All rights reserved.