Levy, Haim; De Giorgi, Enrico; Hens, Thorsten - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003
and Mossin assume expected utility (EU) maximization following the approach proposed by Markowitz, normal distributions … paradigm to EU theory. They show that investors distort probabilities, make decisions based on change of wealth, exhibit loss … wealth rather than total wealth contradicts EU theory. The subjective distortion of probabilities violates the CAPM …