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arXiv · 1608.02446

Who would invest only in the risk-free asset?

Nuno Azevedo·Diogo Pinheiro·Stylianos Xanthopoulos·Athanasios Yannacopoulos
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Abstract

Within the setup of continuous-time semimartingale financial markets, we show that a multiprior Gilboa-Schmeidler minimax expected utility maximizer forms a portfolio consisting only of the riskless asset if and only if among the investor's priors there exists a probability measure under which all admissible wealth processes are supermartingales. Furthermore, we show that under a certain attainability condition (which is always valid in finite or complete markets) this is also equivalent to the existence of an equivalent (local) martingale measure among the investor's priors. As an example, we generalize a no betting result due to Dow and Werlang.

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Nuno Azevedo, Diogo Pinheiro, Stylianos Xanthopoulos, Athanasios Yannacopoulos. 2016-08-08. Who would invest only in the risk-free asset?. https://arxiv.org/abs/1608.02446

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