Generally, indifference curve is more suitable for representing utility derived from consumption of goods, as increase of income(budget line) causes upward shift in curve indicating obvious increase in net utility derived. While applying the the indifference curve concept to return expectation and std deviation, how borrowing money would shift the curve upwards for a same person is not clear. This return -risk indifference curve will be flatish for a risk taker but the curve would start from a higher level on Y -axis at X(risk) equal to zero. For a risk averse investor , the curve will start at lower level on Y-axis but would be more upward sloping. The CAPM line should be fitted to that indifference curve
@abdullahal-hazzani98827 жыл бұрын
Thanks
@arunimagoel47735 жыл бұрын
Thank you. You are awesome.
@josephanderson20182 жыл бұрын
Really helpful video!
@MrHugosky17 жыл бұрын
Hello professor Moy. I love your videos, and I have the two following questions:1) Is there a theory calculating a Risk Aversion coefficients using the "Returns" and the "Standard Deviation" instead of the utility function and the wealth variables?2) Could you please tell me which bibliography you used in your explanation about "Indifferences Curves for Various Types of Investors"? (explanation on minute 2:46). Thank you very much in advance for your assistance.
@abdulrazzaq97265 жыл бұрын
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@anumhussain847310 жыл бұрын
Thank you!
@annamarie95298 жыл бұрын
Thank you so much!
@BuggKnuckle4 жыл бұрын
how do you plot this in excel based on quadratic utility
@tatyana89bond10 жыл бұрын
Thank you!:)
@rgirotto3 жыл бұрын
Hi Ronald, first i want to thanks for the video. Just a question: shouldn't y-axis be described as "Marginal increase in expected return" ? I´m saying this because i understand that risk lovers are those who accept a lower sharpe ratio for a increased expected return. best regards
@kalpanaruwanthika86905 жыл бұрын
nice
@jithinjoykochumalayil84426 жыл бұрын
is the CML line means the investor can buy more securities by borrowing money and can find an optimal portfolio on the highest utility curve
@RonaldMoy6 жыл бұрын
Yes. The market portfolio is the "best portfolio." By borrowing money, an investor can buy more of this portfolio and based on their preferences, can reach a higher indifference curve.
@jithinjoykochumalayil84426 жыл бұрын
Ronald Moy Thanks man. you really got the skill. one more doubt, if the investor lends his money to gov stocks his portfolio would be on the beginning of CML. When he add more risky investments into the portfolio he will move up in the CML. is this right.,?