See Lamont and Thaler (2003b) for a detailed analysis of 3Com's disposal of Palm, as well as several other violations of the LoOP. The larger is 7 the more sensitive the investor's utility is to fluctuations in consumption, which are a consequence of fluctuations in wealth that occur in response to random changes in assets' returns. Gucci 85th Anniversary Handbag. In a sense, asset A 'yields more than it should' (where should is not normative but refers to the CAPM prediction); and asset B 'yields less than it should'. Order Gucci High Tops. To grasp what this means, suppose that an investor purchases ten futures contracts at a price of $1000 each and that the next trading day the price rises to $1050. Gucci 85th Anniversary Handbag. Although it makes no sense for the underlying asset to be delivered when the contract matures, cash settlement provides a natural mechanism for closing contracts that remain open at the 'delivery date'. Gucci Gg Jacquard Messenger Bag. The investor is then assumed to choose a consumption and portfolio plan that maximizes the expected value of lifetime utility - i.e. to maximize Et[U( ')] -where the t subscript is a reminder that the expectation is made on the basis of beliefs at the current date, t. Gucci 85th Anniversary Handbag. If (10.6) does not hold, it would be possible for investors to make unbounded (arbitrage) profits by borrowing at the risk-free rate and buying the asset (if the asset's price is less than the discounted present value of its future returns), or by short-selling the asset and lending the proceeds at the risk-free rate (if the asset's price exceeds the discounted present value of its future returns).