@techreport{Muller2004Underdiversification,
abstract = {Owners of private companies are often highly underdiversified which exposes them to
idiosyncratic risk. We investigate the consequences of underdiversification at the company level. Information on US companies and their owners is obtained from the Survey
of Consumer Finances and the Survey of Small Business Finances. Underdiversification,
measured as the share of the owner's net worth invested in the company, has a
significant positive relationship with profitability, measured as the return on equity.
We identify two causes for this underdiversification effect: higher required returns and
higher effort. The results have important consequences for investment decisions at
private companies.},
address = {Mannheim},
author = {Elisabeth M\"{u}ller},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {G11; G32; 330; underdiversification; required returns; incentives; private companies; wealth; entrepreneurship; Klein- und Mittelunternehmen; Unternehmer; Investition; Portfolio-Management; Rentabilit\"{a}t; \"{O}konomischer Anreiz; Sch\"{a}tzung; Vereinigte Staaten},
language = {eng},
note = {More recent version: http://hdl.handle.net/10419/29639},
number = {04-29},
publisher = {Zentrum f\"{u}r Europ\"{a}ische Wirtschaftsforschung (ZEW)},
title = {Underdiversification in Private Companies: Required Returns and Incentive Effects},
type = {ZEW Discussion Papers},
url = {http://hdl.handle.net/10419/24054},
year = {2004}
}
