When James Tobin Received a Nobel Prize in Economics, Partly

question 52

Essay

When James Tobin received a Nobel prize in economics, partly for demonstrating theoretically the rationale for diversifying a portfolio of assets, Charles Kindleberger, President of the American Economic Association, remarked that Tobin had received the prize for proving that 'it doesn't pay to put all your eggs in one basket'.Why might a saver decide to diversify his or her portfolio of assets?

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Definitions:

Financing Cash Flows

Cash flows related to obtaining or repaying capital, such as issuing or buying back shares and borrowing or repaying loans.

Paying Cash Dividends

Paying Cash Dividends involves distributing a portion of a company's earnings to shareholders in cash, reflecting a return on investment.

GAAP

A group of standard accounting practices and principles broadly used for reporting financial information.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that serve as a global framework for preparing financial statements.