Diversification as a public good: Community effects in portfolio choice

• 成果类型: Article
• 署名作者: Demarzo, PM; Kaniel, R; Kremer, I
• 署名单位: Stanford University; Duke University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2004.00676.x
• 发表日期: 2004
• 页码: 1677-1715
• 关键词: home bias; tournaments; inflation; explain; prices

摘要

Within a rational general equilibrium model in which agents care only about personal consumption, we consider a setting in which, due to borrowing constraints, individuals endowed with local resources underparticipate in financial markets. As a result, investors compete for local resources through their portfolio choices. Even with complete financial markets and no aggregate risk, agents may herd into risky portfolios. This yields a Pareto-dominated outcome as agents introduce community risk unrelated to fundamentals. Moreover, if some agents are behaviorally biased, or cannot completely diversify their holdings, rational agents may choose more extreme portfolios and amplify the effect.