Lower risk, higher reward: New study reveals key to maximizing wealth.
Investors who are less afraid of taking risks tend to have a higher average payoff but with a wider range of possible outcomes. This has been shown in mathematical models, where lower risk aversion leads to larger payoffs in terms of second order dominance. These findings hold true in continuous-time models and for power investors with independent increments. However, these results can be easily disrupted by small changes in the model.