We investigate the relationship between revenue diversification and volatility for nonprofits. Modern portfolio theory suggests that more diversification reduces volatility at the expense of reduced expected revenue. We find that this relationship should not be taken for granted. We use a new empirical measure of volatility that addresses estimation issues of expected revenue, including heteroskedasticity and the omission of the effect of diversification on expected revenue. We also examine the impact on nonprofits of different types of diversification. We find that the effects of diversification on volatility and expected revenue depend on the compositional change in the portfolio. For example, a more diversified portfolio achieved by replacing earned income with donations reduces both volatility and expected revenue, while replacing investment income with donations to achieve an increase in diversification of the same magnitude reduces volatility and increases expected revenue. This suggests other motives for nonprofit organizations to hold investments.

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Does legalizing retail marijuana generate more benefits than costs? This paper provides a first step toward addressing that question by measuring the benefits and costs that are capitalized into housing values. We exploit the time‐series and cross‐sectional variations in the adoption of Colorado's municipality retail marijuana laws (RMLs) and examine the effect on housing values with a difference‐in‐differences strategy. Our estimates show that the legalization leads to an average 6% increase in housing values, indicating that the capitalized benefits outweigh the costs. In addition, we find suggestive evidence that this relatively large housing value appreciation is likely due to RMLs inducing strong housing demand while having no discernible effect on housing supply. Finally, we show that the effect of RMLs is heterogeneous across locations and property types. (JEL K20, R28)

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