Markets Do Not Select For a Liquidity Preference as Behavior Towards Risk
AbstractTobin (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.
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Bibliographic InfoPaper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 139.
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demand for money; portfolio theory; evolutionary finance;
Other versions of this item:
- Hens, Thorsten & Schenk-Hoppe, Klaus Reiner, 2006. "Markets do not select for a liquidity preference as behavior towards risk," Journal of Economic Dynamics and Control, Elsevier, vol. 30(2), pages 279-292, February.
- Thorsten Hens & Klaus Reiner Schenk-Hoppé, 2002. "Markets Do Not Select For a Liquidity Preference as Behavior Towards Risk," Discussion Papers 02-18, University of Copenhagen. Department of Economics.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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