Question: Assume the random variable W has expectation value E[W] = and variance Var[W] = 2 . Mean variance analysis postulates that expected utility
Assume the random variable W has expectation value E[W] = μ and variance Var[W] = σ2. Mean variance analysis postulates that expected utility increases with increasing μ, and decreases with increasing σ2. Show that quadratic utility coincides with these postulates.
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Quadratic utility is defined as UW W W2 where and are positive constants The expected utility of the ... View full answer
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