Advanced Search
MyIDEAS: Login to save this paper or follow this series

Liquidity Motives of Holding Money under Investment Risk: A Dynamic Analysis

Contents:

Author Info

  • Kiyohiko G. Nishimura

    (Faculty of Economics, The University of Tokyo)

  • Hiroyuki Ozaki

    (Faculty of Economics, Tohoku University)

Registered author(s):

    Abstract

    Jones and Ostroy (1984) argue that money,as an asset of the least transaction cost, offers exibility to its holder, which other assets cannot provide. We extend the idea of Jones and Ostroy into a truely dynamic framework of infinite horizon with a risk-neutral decision-maker. We then investigate the effect of an increase in investment risk on the demand for liquidity a la Jones and Ostroy. In particular, we prove that the opitmal strategy exists, that it has a reservation property, and that the reservation value increases when investment risk increases in the sense of a mean-preserving spread. While the effect of a mean-preserving spread on the reservation value is unambiguous, its e ect on money demand is ambiguous. We then provide conditions on increasing investment risk under which money demand unambiguously increases.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2003/2003cf232.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-232.

    as in new window
    Length: 40 pages
    Date of creation: Jul 2003
    Date of revision:
    Handle: RePEc:tky:fseres:2003cf232

    Contact details of provider:
    Postal: Hongo 7-3-1, Bunkyo-ku, Tokyo 113-0033
    Phone: +81-3-5841-5644
    Fax: +81-3-5841-8294
    Email:
    Web page: http://www.cirje.e.u-tokyo.ac.jp/index.html
    More information through EDIRC

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Ozaki, Hiroyuki & Streufert, Peter A., 1996. "Dynamic programming for non-additive stochastic objectives," Journal of Mathematical Economics, Elsevier, vol. 25(4), pages 391-442.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:tky:fseres:2003cf232. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CIRJE administrative office).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.