Question: Given the demand function for individual (k) in (5.11), and (5.15) when there is a risk-free asset, interpret the variables (h, m, g) and (f).
Given the demand function for individual \(k\) in (5.11), and (5.15) when there is a risk-free asset, interpret the variables \(h, m, g\) and \(f\). Explain how each of these variables impact on the investment weight \(w_{k}^{*}\). What is the implication of the fact that \(h\) and \(g\) are orthogonal? [Hint: You may like to use the special case for \(n=2\) to illustrate your answers.]
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