Why would an investor prefer to lower his total return with increasing his sharp ratio?
Because he likes the to have a higher Sharpe Ratio.
Why would an investor prefer bonds (lower returns) over Emerging Market Equities (higher returns)?
I would assume to maximise his return per unit of risk, hence the higher Sharpe ratio
so do you mean that the investor prefers a stable or less volatile return rather a high return?
is this just a generic question or are you relating this to a CFA question? just trying to figure out the context here
you need to take risk to earn a return, unless you’re investing in the risk-free rate.
you’ll get some amount of return per unit of risk. based on the efficient frontier, your returns will increasing at a decreasing marginal rate for each level of risk that you add to your portfolio (less additional return for each unit of risk that you add).
to your question, it’s not a lower volatility perspective as such, although adding EM would be adding volatility to your portfolio, but risk efficient in terms of your return (added return per unit of additional risk).