Preferences over Risky assets Higher mean return is preferred Less variation in return is preferred (less risk) Preferences are represented by a utility function U(μ,σ) U个 as mean returnμ个 U↓ as risk o个Preferences over Risky Assets Higher mean return is preferred. Less variation in return is preferred (less risk). Preferences are represented by a utility function U(,). U  as mean return  . U  as risk  