Abstract
This note considers a portfolio problem with a complete set of Arrow-Debreu securities, each of which pays a positive return in only one state. It is shown that an increase in the return to asset i in state i causes an increase (no change; a decrease) in demand for asset i if and only if relative risk aversion evaluated in state i is less than (equal to; greater than) unity. Demands for all other assets change in the opposite direction. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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