New formula ensures fair returns for all investors in mutual funds!
The article discusses how a fund manager can manage investments from risk-averse investors with different risk preferences. The researchers found that when investors have varying levels of risk aversion, the initial contributions of investors must follow a specific formula based on their risk preferences. This formula ensures that individual investors are not penalized for participating in the mutual fund. The study also applies this approach to a single investor with risk aversion that depends on the assets in the portfolio.