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An investor has the utility function: U(e(r), (r)) = E(r) - 0,5- (r) He can invest in the risk free asset, which returns 5%,
An investor has the utility function: U(e(r), (r)) = E(r) - 0,5- (r) He can invest in the risk free asset, which returns 5%, and an index fund, which returns 8% in expectation, with a variance of 0,04. What is the optimal weight of each of these two assets in his portfolio?
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Managerial Economics Theory Applications and Cases
Authors: Bruce Allen, Keith Weigelt, Neil A. Doherty, Edwin Mansfield
8th edition
978-0393124491, 393124495, 978-0039391277, 393912779, 978-0393912777
