Adding up constraints and gross subsitution in portfolio models

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We consider a static portfolio system that satisfies adding-up constraints and Tobin's gross substitution theorem. We show the relationship of the two conditions to the weak dominant diagonal property of the matrix of interest rate elasticities. This enables us to investigate effects of arbitrary simultaneous changes in interest rates on the asset demands. Finally, we show that all asset demands are invariant under a certain nonnegative, but nonzero, change of the interest rates.
Original languageEnglish
Pages (from-to)531-533
Number of pages3
JournalApplied Economics Letters
Issue number8
Publication statusPublished - 1998

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