Portfolio choices in the presence of other risks

A model of portfolio choice is used to examine the effects of multivariate risks such as uncertain wealth, uncertain prices of goods and other risky attributes. Conditions under which portfolio choices can be separated from consumption decisions are derived. The optimal portfolio is affected by other risks unless the appropriate restrictions hold on investors' preferences or on the probability distribution of risks. This requires generalizing the usual measures of risk aversion. With one risky asset, matrix measures of risk aversion are used to generalize the effects of risk aversion and wealth on the optimal portfolio. With two risky assets, the choices made by two investors will coincide if and only if their generalized risk-aversion measures are the same. The effect of risk aversion on the level of investment on the riskier asset is then characterized.