10min chapter

The Rational Reminder Podcast cover image

Episode 270: Victor Haghani and James White: The Missing Billionaires

The Rational Reminder Podcast

CHAPTER

Understanding Utility and the Merton Share

In this chapter, the hosts delve into the concept of utility and its challenges in comprehension. They then explain the Merton share, a method for sizing positions in risky assets based on proportional expected returns and inversely proportional variance. They highlight the nonlinear relationship between risk and return and provide background information on Bob Merton, the creator of the Merton share.

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