Skip to main content
edited tags
Link
Giskard
  • 29.7k
  • 11
  • 47
  • 81
Source Link

Risk seeking investors: Do they benefit from return at all?

Starring on the indifference curves for different types of risk preferences I ask myself why the risk seeking investor would be indifferent between an investment on the far left of his indifference curve (an investment that would not provide any risk but a specific amount of return) and an investment on the far right of the indifference curve (so an investment that provides him with a lot of risk while a lower return can be expected). As to my understanding a risk seeking investor loves the risk so why does an investment with lower risk provides him the same utility as an investment with higher risk? Is it because risk seeking investors also get some utility from expected return? So while the risk seeking investor get's a higher value from risk that does not mean he's getting no value from expected return. Other than that I couldn't explain the form of the indifference curve and would appreciate any help.

Indifference curves for different risk types