| The task of assigning investors to the right risk tolerance category and therefore, suggesting the most suitable investment portfolios to them, is an essential, and legally obligated part of the mutual fund providers' service. Although this problem is significant, not much have been done in the academic world to address the need.; DEA is a non-parametric LP optimization technique, which is often used for measuring efficiency in services production units. What makes it appealing for risk tolerance assessment is its ability to handle multiple variables at the same time. Just like when it measures efficiency based on several inputs and outputs, it can measure risk tolerance based on several psychological questions, each of them representing one dimension of risk tolerance. This is the first time DEA has been used for evaluating a psychologically oriented dataset, and the results have been quite encouraging. |
