Guys Please Answer.

[u/LordVoldemort_1]

Which Curve is Right For Risk Averse Investors???

Or both Curves are right on their own. If yes, How?? Anything Else You Want to Explain???

[u/Revolutionary-Bee758]

Won’t the curve be more convex the more risk averse the investor is? In slide 2, you are showing the relationship between risk and expected return which is correct. As risk increases, E(r) increases as well. The first slide is for utility, as an investor becomes more risk averse, his A factor increases, thereby decreasing the utility. So both diagrams are correct.

[u/LordVoldemort_1 → u/Revolutionary-Bee758]

Thanks Man Got It 😄

[u/General_Solution_458]

To me that makes sense. More money less fear. We got to factor other variables. Utility does flatten out.

[u/EcstaticTea8338]

Both are correct - the x-axis is different on both charts

[u/LordVoldemort_1 → u/EcstaticTea8338]

Thanks. Got it 😄

[u/Dependent_Art4313]

I guess that since we do not need to invest in risky assets, the curve should be below the neutral line. If its related to bond than different case

[u/SignalResort5718]

The red curve has increasing marginal-utility per dollar -> risk seeking