We investigate whether alternative asset classes should be included in optimal portfolios of the most prominent investor personae in the Behavioral Finance literature, namely, the Cumulative Prospect Theory, the Markowitz and the Loss Averse types of investors. We develop a stochastic spanning...

Most economic models are prescriptive and based on expected utility theory. Decisions taken on the basis of these models ought to be completely rational and consistent with axioms of the expected utility theory. Prospect theory (PT) is an alternative theory of choice under risk and increasingly...