We prove a formula for the computation of optimal financial investments in an expected utility framework with arbitrary (not necessarily concave) utility functions. This extends classical results on optimal financial investments for strictly concave utility functions and is of importance...

We show that security-potential-aspiration theory (SP/A) and cumulative prospect theory (CPT), although based on very different psychological principles are mathematically very similar when studied in the appropriate framework. This helps to interpret results on portfolio optimization under...

Estimates of agents’ risk aversion differ between market studies and experimental studies. We demonstrate that these estimates can be reconciled through consistent treatment of agents’ propensity for narrow framing.