Re: Uncertainty - June 20

Posted by anon_econ on Jun 19, 2012; 4:22pm
URL: http://discussion-forum.276.s1.nabble.com/Uncertainty-June-20-tp7578257p7578261.html

E(Y+Z)=E(Y)+E(E(Z|Y))=E(Y)+0. so the expected values of both r equal. every risk averse individual would prefer Y to Y+Z coz they wont take additional risk if the expected value isnt increasing. risk neutral people would be indifferent. and risk loving people would prefer Y+Z. this means only statement 2 is correct.
i know this is wrong. in fact i think the first step is wrong.