Following Hadar and Seo, the paper aims to determine, in the case of a portfolio with three assets, the condition of preservation of comparative statics results under which a change in risk increases the optimal value of the decision variables for all risk‐averse investors.
Using the first‐ and second‐order conditions, the paper examines a theoretical approach of a particular portfolio problem in two stages. The first step considers the case of dependence between assets where the second extends previous results in the case of dependence between assets.
It is found that even in the case of portfolio with two risky assets and one risk less asset that an FDS or an MPC deterioration that affects either the distribution will increase the weight of this asset in the optimal fund for all decision makers whose preferences exhibit decreasing absolute risk aversion.
The paper extends the previous study in the case of dependence between assets and examines portfolio with more than two assets.
