In this study, we consider two competing methods, traditional mean/variance efficient portfolio and a generalization allowing for skewness as a Bayesian decision problem. Using observed (market) weights we investigate the market's preference for risk. We do this with bilevel optimization, where...

We explore a satisficing approach (Simon, 1955) to measure risk preference, which suggests cognitive limitations to decision making. In an experiment, subjects invest in a portfolio that contains a risk-free bond and a risky asset which has high or low return states with equal probability. The...