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Efficiency, Risk Aversion and Portfolio Insurance: An Analysis of Financial Asset Portfolios Held by Investors in the United Kingdom

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  • Blake, David

Abstract

Using data for the United Kingdom, the author shows that investors in six different wealth ranges hold mean-variance efficient portfolios of financial assets. This result permits him to estimate coefficients of relative risk aversion for investors in each wealth range. The author finds that these coefficients are much higher than most previous studies have found. This implies that investors (1) are unwilling to hold risky assets unless they are compensated with a sufficiently high risk premium and (2) are willing to pay for portfolio insurance. The general nonavailability of portfolio insurance in the United Kingdom appears to indicate a supply-side rather than a demand-side failure. Copyright 1996 by Royal Economic Society.

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  • Blake, David, 1996. "Efficiency, Risk Aversion and Portfolio Insurance: An Analysis of Financial Asset Portfolios Held by Investors in the United Kingdom," Economic Journal, Royal Economic Society, vol. 106(438), pages 1175-1192, September.
    • Handle: RePEc:ecj:econjl:v:106:y:1996:i:438:p:1175-92
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