New investment strategy maximizes returns while adapting to changing risk levels.
The article presents a method for creating a portfolio strategy that considers changes in investors' risk tolerance over time. The researchers developed a model that adjusts risk aversion based on the investor's current wealth level and investment target. By solving a complex mathematical game, they found a way to create a portfolio policy that is consistent over time. This policy uses a simple linear formula to determine how much to invest based on the current wealth level and target.