More Possessions, More Worry

41 Pages Posted: 9 Feb 2014 Last revised: 3 Apr 2014

See all articles by Haim Levy

Haim Levy

Hebrew University of Jerusalem - Jerusalem School of Business Administration; Fordham University

Yusif Simaan

Fordham University - Graduate School of Business

Date Written: February 7, 2014


A common wisdom asserts that the wider the universe of assets to choose from the greater the investor’s welfare. We show that this is not the case in practice where parameters have to be estimated even when the estimates are unbiased. Surprisingly, risk aversion plays a crucial and rather uncommon role corresponding to the desirability of asset expansion by dividing investors in three groups: we find that Investors with very low (group 1) and investors with very high (group 2) risk tolerance are better-off with asset expansion and investors with moderate risk tolerance (group 3) are worse-off despite the option to refrain from investing in the additional asset. These results have implication to the CAPM, the existence of mutual funds and the observed small portfolios held by investors.

Keywords: portfolio theory, estimation risk, CAPM, rational choice, optimization under estimation risk

JEL Classification: C, G

Suggested Citation

Levy, Haim and Simaan, Yusif, More Possessions, More Worry (February 7, 2014). Fordham University Schools of Business Research Paper No. 2392530. Available at SSRN: or

Haim Levy

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem, 91905


Fordham University ( email )

140 West 62nd Street
New York, NY 10023
United States

Yusif Simaan (Contact Author)

Fordham University - Graduate School of Business ( email )

113 West 60th Street
Bronx, NY 10458
United States
6462200652 (Phone)

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