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Expected Utility And Risk Aversion George Pennacchi University Of Illinois

Description: Expected utility is the common framework for modeling investor choices We .rst analyze conditions individual preferences must satisfy to be consistent with expected utility functions. We then c...

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Expected utility is the common framework for modeling investor choices We .rst analyze conditions individual preferences must satisfy to be consistent with expected utility functions. We then consider the link between utility and risk aversion and risk premia for particular assets. Finally, we look at how risk aversion a¤ects the choice between a risky and riskfree asset. George