Markets Do Not Select For a Liquidity Preference as Behavior Towards Risk

Tobin (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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Year of publication:	2002-12
Authors:	Hens, Thorsten ; Schenk-Hoppé, Klaus Reiner
Institutions:	Økonomisk Institut, Københavns Universitet
Subject:	demand for money \| portfolio theory \| evolutionary finance

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Extent:	application/pdf
Series:	Discussion Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 02-18 10 pages
Classification:	G11 - Portfolio Choice ; E41 - Demand for Money ; D81 - Criteria for Decision-Making under Risk and Uncertainty
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005225497