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Lecture 22 - Risk Aversion and the Capital Asset Pricing Theorem

Lecture 22 - Risk Aversion and the Capital Asset Pricing Theorem

This video was recorded at YALE - ECON 251 - Financial Theory. Until now we have ignored risk aversion. The Bernoulli brothers were the first to suggest a tractable way of representing risk aversion. They pointed out that an explanation of the St. Petersburg paradox might be that people care about expected utility instead of expected income, where utility is some concave function, such as the logarithm. One of the most famous and important...

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