Valuing Information Using Utility Functions: How Much Should We Pay for Forecasts of Returns?
نویسندگان
چکیده
This study investigates what is an appropriate level of investment management fees. We extend existing results and provide a several formula for the case of power utility and normal returns. Using the CRRA utility function with the range of the coe¢cient of the CRRA suggested by Mehra and Prescott (1985), we ...nd that the value of information added by linear factor models of Fama and French (1992) exceeds observed management fees and only equals them for hitherto unmeasured magnitudes of risk aversion.
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