Published in:Fordham University Schools of Business Research Paper ; No. 2392530
Extent:
1 Online-Ressource (41 p)
Language:
English
DOI:
10.2139/ssrn.2392530
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 7, 2014 erstellt
Description:
A common wisdom asserts that the wider the universe of assets to choose from the greater the investor's welfare. We show that this is not the case in practice where parameters have to be estimated even when the estimates are unbiased. Surprisingly, risk aversion plays a crucial and rather uncommon role corresponding to the desirability of asset expansion by dividing investors in three groups: we find that Investors with very low (group 1) and investors with very high (group 2) risk tolerance are better-off with asset expansion and investors with moderate risk tolerance (group 3) are worse-off despite the option to refrain from investing in the additional asset. These results have implication to the CAPM, the existence of mutual funds and the observed small portfolios held by investors