Asset Demand: A Simple Dual Approach

Appelbaum, Elie (2021): Asset Demand: A Simple Dual Approach.

Abstract

This paper provides a simple framework for obtaining asset demand using indirect utility functions. Assuming expected utility maximization, we show that assets are held according to their mean returns' proportional marginal utility. We also show that an asset's equilibrium equity premium is given by the ratio of the indirect utility function's mean and standard deviation elasticities. Furthermore, we show that we can extend these results to a non-expected utility framework.

• Item Type: MPRA Paper
• Language: English
• Keywords: Moments, Indirect Utility Function, Asset Demand, Duality.
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Household Saving; Personal Finance; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions

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