Suppose you have a risk-aversion coefficient of 3.0, and utility function of,U=?[?]−1/2??squared , that uses your...

Suppose you have a risk-aversion coefficient of 3.0, and utility function of,U=?[?]−1/2??squared , that uses your estimate of annual arithmetic returns (APR) and variance. Which index wouldyou invest in?

Date	North_America	Japan	Asia_exJapan	Europe	Global	Rf
199007	-0.82%	0.78%	4.85%	5.05%	1.47%	0.68%
199008	-8.93%	-11.25%	-7.82%	-10.20%	-10.10%	0.66%
199009	-5.41%	-17.43%	-8.25%	-11.74%	-11.64%	0.60%
199010	-1.33%	25.59%	-1.58%	7.27%	10.26%	0.68%
199011	6.43%	-13.52%	-2.29%	0.17%	-3.30%	0.57%
199012	3.11%	2.34%	-0.61%	-0.95%	1.63%	0.60%
199101	4.73%	1.67%	6.03%	2.12%	2.99%	0.52%
199102	7.70%	12.81%	9.26%	7.78%	9.57%	0.48%
199103	2.80%	-3.76%	2.13%	-6.34%	-1.93%	0.44%
199104	0.34%	2.68%	3.24%	-0.21%	1.13%	0.53%
199105	4.16%	-1.59%	-0.40%	1.13%	1.22%	0.47%
199106	-4.27%	-6.61%	-0.50%	-7.02%	-5.65%	0.42%
199107	4.42%	1.85%	6.04%	5.94%	3.93%	0.49%
199108	2.62%	-6.79%	-1.48%	1.86%	-0.94%	0.46%
199109	-1.29%	9.10%	1.16%	3.42%	3.34%	0.46%
199110	1.84%	4.47%	4.33%	-2.33%	1.78%	0.42%
199111	-3.76%	-8.14%	-0.26%	-1.89%	-4.75%	0.39%
199112	10.30%	2.85%	1.58%	6.61%	6.56%	0.38%
199201	-0.34%	-5.33%	1.36%	-0.03%	-1.86%	0.34%
199202	1.28%	-6.95%	1.85%	0.15%	-1.61%	0.28%

Expert Solution

jeff jeffy answered 2 years ago

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