Quantifiable, measurable risk is of critical importance when making data-driven decisions in finance and investment … management, but what if the generally accepted practice of the investment industry for calculating risk possessed incorrect … present a new example illustrating the bias when applied to an efficient frontier. …

returns and risk attitudes by using data on observed portfolio holdings and self-assessed willingness to bear financial risk … of the investors are relevant in shaping risk aversion and return expectations. In contrast, wealth, income, and past … market performance have limited impacts on expectations and risk aversion …

more turbulent 2008 and 2011. This discrepancy distorts assessments of portfolio risk-adjusted performance when …