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Non-diversified portfolios with subjective expected utility

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  • Chambers, Christopher P.
  • Gerasimou, Georgios

Abstract

Diversification is the typical investment strategy of risk-averse agents. However, non-diversified positions that allocate all resources to a single asset, state of the world or revenue stream are common too. We show that whenever finitely many non-diversified demands under uncertainty are compatible with risk-averse subjective expected utility maximization under strictly positive beliefs, they are also rationalizable under the same beliefs by many qualitatively distinct risk-averse as well as risk-neutral and risk-seeking preferences.

Suggested Citation

  • Chambers, Christopher P. & Gerasimou, Georgios, 2024. "Non-diversified portfolios with subjective expected utility," Economics Letters, Elsevier, vol. 244(C).
    • Handle: RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524005202
    DOI: 10.1016/j.econlet.2024.112036
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