Why Would Anyone Invest in a High-Risk Low-Profit Enterprise?

Authors

Olga Kosheleva, The University of Texas at El PasoFollow
Vladik Kreinovich, The University of Texas at El PasoFollow

Publication Date

7-1-2022

Comments

Technical Report: UTEP-CS-22-88

Abstract

Strangely enough, investors invest in high-risk low-profit enterprises as well. At first glance, this seems to contradict common sense and financial basics. However, we show that such investments make perfect sense as long as the related risks are independent from the risks of other investments. Moreover, we show that an optimal investment portfolio should allocate some investment to this enterprise.