The origin of the utility function is not clear. The assumption of std deviation of return from shares to be 1 means the returns follow standard normal distribution. In such case, the expected returns need to be zero and not 1,2 ,3. Most of the time , the presenter's body blocks the board , so nothing is visible.
The utility function is basically the objective function of the investor. You want to maximize the return and minimize the risk (hence negative sign), and you multiply 1/2 with risk simply for ease of calculation.
The origin of the utility function is not clear. The assumption of std deviation of return from shares to be 1 means the returns follow standard normal distribution. In such case, the expected returns need to be zero and not 1,2 ,3. Most of the time , the presenter's body blocks the board , so nothing is visible.
How did you came up with that Utility Function. This ruins the whole hard work of patiently watching and making notes from the first lecture.
what is the reference books of this part?
investment science luenberger
3:30 , how did you come up with that utility function?
The utility function is basically the objective function of the investor. You want to maximize the return and minimize the risk (hence negative sign), and you multiply 1/2 with risk simply for ease of calculation.
@@ritasreede7460 Hey Sir, thank you so much for your explaining! That's greatly helpful! God Bless!🙏
@@ritasreede7460 thank you so much for reply!