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Basic Question 12 of 16
Which contributes to higher utility, according to the utility theory (for a typical investor)?
II. Higher variance
III. Higher risk-aversion coefficient
I. Higher return
II. Higher variance
III. Higher risk-aversion coefficient
User Contributed Comments 3
| User | Comment |
|---|---|
| gill15 | Why isnt III correct? Higher the value of A the lower the utility score (High positive A from notes is Risk Averse ---- Low utility is less tolerance to risk) |
| gill15 | Never mind... |
| khalifa92 | Utility theory = Expected return - ( 0.5*var*A) those are subtracted contribute to lower utility |
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Andrea Schildbach
Learning Outcome Statements
explain risk aversion and its implications for portfolio selection
CFA® 2024 Level I Curriculum, Volume 2, Module 1.