This article compares a capital market in which prices are set by a single expected utility maximizing investor with a market in which the expected utility maximizing investor owns only a part of the wealth, the balance being held by an investor who follows a portfolio insurance strategy. Comparative values for the market risk premium, the cost of insurance, the market volatility, and the level of interest rates are computed for different levels of portfolio insurance.
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Brennan et al. (1989) studied this question.
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