Fill This Form To Receive Instant Help
Homework answers / question archive / ‘The great advantage of short-term assets, given risk aversion and an uncertain world, is that they facilitate the utilization of new of new information about the environment as it becomes available over time
‘The great advantage of short-term assets, given risk aversion and an uncertain world, is that they facilitate the utilization of new of new information about the environment as it becomes available over time.’ (J. Hirshleffer) Discuss.
Short term asset is always known for higher level of liquidity and flexibility so informations are getting quickly discounted into the prices and they will also offer the investor to sell those assets at prevalent market rate and it will also not expose him to any kind of liquidity risk so investor will be selling the short term asset when he will feel like. He will have the risk associated with holding of the Asset in the short term so it will offer him with respectable exit with the fair value and without much loss of the value.
It is a great advantage for Risk averse investor because they do not want to get locked in some asset which are exposing them to higher risk over the longer time like long term bonds, so they will be always trying to have higher liquidity in the Assets and quick discounting of the information which will not expose them to higher price volatility so it can be said that short term asset will be always facilitating utilisation of new information quickly as it will make investor to invest into them as they have high degree of liquidity.