Financial Giffen Goods: Examples and Counterexamples

Rolf Poulsen; Kourosh Marjani Rasmussen

doi:10.1016/j.ejor.2007.06.047

Financial Giffen Goods: Examples and Counterexamples

Rolf Poulsen, Kourosh Marjani Rasmussen

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Abstract

In the basic Markowitz and Merton models, a stock’s weight in efficient portfolios goes up if its expected rate of return goes up. Put differently, there are no financial Giffen goods. By an example from mortgage choice we illustrate that for more complicated portfolio problems Giffen effects do occur.

Original language	English
Journal	European Journal of Operational Research
Volume	191
Issue number	2
Pages (from-to)	571-575
ISSN	0377-2217
DOIs	https://doi.org/10.1016/j.ejor.2007.06.047
Publication status	Published - 2008

Keywords

Mortgage Financing
Giffen good
Portfolio choice

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GiffenGoods

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AB - In the basic Markowitz and Merton models, a stock’s weight in efficient portfolios goes up if its expected rate of return goes up. Put differently, there are no financial Giffen goods. By an example from mortgage choice we illustrate that for more complicated portfolio problems Giffen effects do occur.

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KW - Portfolio choice

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DO - 10.1016/j.ejor.2007.06.047

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Financial Giffen Goods: Examples and Counterexamples

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