Yaari's dual theory of choice is the natural counterpart of expected utility theory. While the optimal payoff choice for an expected utility maximizer is well studied in the literature, substantially less is known about the optimal payoff for a Yaari investor. In the first part of the paper, we...

Many financial portfolios are optimized without taking the higher moments into account. We recommend tilting these portfolios in a direction that increases their estimated mean and third central moment and decreases their variance and fourth central moment. The advantages of tilting come at the...

Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant (state-independent) setting corresponds to the optimum for an...