"Accounting information, disclosure, and expected utility: Do investors" by D. J. Johnstone
Abstract Investors are said to “abhor uncertainty,” but if there were no uncertainty they could earn only the risk-free rate. A fundamental result in the analytical accounting literature shows that investors buying into a CARA-normal CAPM market pay lower asset prices, gain higher ex-ante expected returns, and obtain higher expected utility, when the market payoff has higher variance. New investors obtain similar “welfare” gains from risk under a log/power utility CAPM. These results do not imply that investors “abhor information.” To realize investors' ex-ante expectations, the s...
Source: uow.edu.au