Why Does Junior Put All His Eggs In One Basket? A Potential Rational Explanation for Holding Concentrated Portfolios On-line Appendix
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چکیده
Assume that (c, (x, z)) is a feasible strategy for initial conditions (Wt, Yt). Then, for all α > 0, we first show that (αc, (αx, αz)) is a feasible strategy for initial conditions (αWt, αYt). Consider the dynamics for the wealth process Wα, with initial conditions (αWt, αYt), following the consumption and investment plan (αc, (αx, αz)). We have dWαs = αWsds− αcsds+ αYsds+ αz ⊺ s (μ− r1)ds+ αz ⊺ sσdws = αdWs, (1) therefore, Wαs = αWs. Similarly, we have Yαs = αYs. The investment strategy satisfies the margin requirement since
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