# Typical risk aversion parameter value for mean-variance optimization?

What are typical values for risk aversion parameters $\lambda$ used in mean-variance optimization? Please provide references.

Just to be clear, I'm talking about the $\lambda$ in $U(w) = w'\mu - \frac{\lambda}{2} w' \Sigma w$, the utility function in mean-variance optimization.

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Shouldn't it be "-" the variance term?!? –  vonjd Jul 7 '13 at 18:33
@vonjd You are right. Just edited. –  J Li Jul 9 '13 at 0:45
@J Li: If you liked my answer you can upvote and accept it - Thank you :-) –  vonjd Jul 10 '13 at 8:55
@vonjd I couldn't vote up yet, it requires 15 reputation. I'm new to SE. But I can accept :) –  J Li Jul 11 '13 at 12:13
@J Li: Thank you for accepting the answer. Now you have the necessary reputation so that you could upvote it too :-) –  vonjd Jul 30 '13 at 8:13

Typical risk aversion levels lie between one and ten.

See pages 11f. in the following paper:
Preferences by Andrew Ang

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Thanks for the response. That is the risk aversion parameter for CARA utility though, not for mean-variance utility. Unless you are suggesting there is a direct way to transform into the latter? (I don't think so. The latter is not unitless and depends on the unit in which you measure returns) –  J Li Jul 9 '13 at 1:05
Please read the paper first: On page 29 it e.g. says: "The mean-variance solution in equation (10) turns out to be the same as CRRA utility (see equation (1)) if returns are log-normally distributed. This is one sense that mean-variance and CRRA are the same." –  vonjd Jul 9 '13 at 8:02
You are right. Thanks for the reference! –  J Li Jul 10 '13 at 2:18