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ASSET DEMANDS AND SLUTSKY EQUATIONS WHEN ALL ASSETS ARE RISKY
Author(s) -
Dalal Ardeshir J.
Publication year - 1988
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.1988.tb00876.x
Subject(s) - complementarity (molecular biology) , economics , portfolio , asset (computer security) , econometrics , simple (philosophy) , inflation (cosmology) , mathematical economics , microeconomics , financial economics , computer science , philosophy , genetics , physics , computer security , epistemology , theoretical physics , biology
This paper exploits the properties of the indirect expected utility function to explore the testable implications of a portfolio model in which all assets are risky. An uncertainty analogue of Roy's Identity and extremely simple derivations of Slutsky equations for risk and return are used in the analysis. Substitutability/complementarity relations between asset pairs are also explored. The one‐riskless‐asset case emerges as a special case of the present model, and it is shown that (since inflation uncertainty makes all real returns uncertain) the inclusion of a riskless asset would lead to misleading over‐simplifications.