The security market line is often flat or downward-sloping. We hypothesize that probability weighting plays a role and that one ought to differentiate between periods in which agents overweight extreme events and those in which they underweight them. Overweighting inflates the probability of...

Any robo-advisor needs to decide on a framework to model the preferences of its investors over uncertain outcomes. As of today, most robo-advisors model their investors as mean-variance optimizers. While the mean-variance framework is intuitive and optimal investment strategies have been derived...

When we implement a portfolio selection methodology under a mean-risk formulation, it is essential to correctly model investors' risk aversion which may be time-dependent, or even state-dependent during the investment procedure. In this paper, we propose a behavior risk aversion model, which is...