INITIAL CAPITAL REQUIREMENT AND RISK AVERSION IN INVESTMENT BEHAVIOR

抄録

This paper explores the role of initial investment amount in the evaluation of investment opportunities. A new “Capital Integration Hypothesis” which takes into account the initial investment amount is introduced, and the family of utility functions it engenders are discussed. Initial investment risk aversion is defined as the behavior implied by certain of these functions, and it is shown that a quadratic utility function falls into this class.