Kane, Marcus, and Trippi (1999) show that the annualized fee that investors should be willing to pay for active management, over and above the fee charged by a passive index fund, depends on
I) the investor's coefficient of risk aversion
II) the value of at-the-money call option on the market portfolio
III) the value of out-of-the-money call option on the market portfolio
IV) the precision of the security analyst
V) the distribution of the squared information ratio of in the universe of securities
