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Investment Flexibility and the Acceptance of Risk

  • Gollier, C.
  • Lindsey, J.
  • Zeckhauser, R.

The hypothesis examined in this paper is that the greater the investor's flexibility, the easier it is for him to change his portfolio depending on his results, the more willing he will be to accept risks. When the investor has no control on the size of the risky investment, but can choose between one risky and one riskless asset, this conjecture is shown to be correct.

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Paper provided by Toulouse - GREMAQ in its series Papers with number 96.421.

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Length: 21 pages
Date of creation: 1996
Date of revision:
Handle: RePEc:fth:gremaq:96.421
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  1. Christian Gollier, 1996. "Repeated Optional Gambles and Risk Aversion," Management Science, INFORMS, vol. 42(11), pages 1524-1530, November.
  2. Jackson, Matthew & Peck, James, 1991. "Speculation and price fluctuations with private, extrinsic signals," Journal of Economic Theory, Elsevier, vol. 55(2), pages 274-295, December.
  3. Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, vol. 3(1), pages 66-84, March.
  4. Duffie Darrell & Rahi Rohit, 1995. "Financial Market Innovation and Security Design: An Introduction," Journal of Economic Theory, Elsevier, vol. 65(1), pages 1-42, February.
  5. Caballe, Jordi & Pomansky, Alexey, 1996. "Mixed Risk Aversion," Journal of Economic Theory, Elsevier, vol. 71(2), pages 485-513, November.
  6. David E. Bell, 1988. "The Value of Pre-Decision Side Bets for Utility Maximizers," Management Science, INFORMS, vol. 34(6), pages 797-800, June.
  7. Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-54, January.
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