Abstract
We relax assumptions on individual risk preference, and set two theoretical rules for portfolio choices: either minimize or maximize risk, for any return. Risk is modeled by four alternative formulas. We empirically test these rules by observing N=690 individuals (Caucasians, bank customers and financial professionals, aged 18-88), while making risky decisions, with measurement of Skin Conductance Response. Two perspectives are assumed to evaluate portfolio efficiency: individuals uniquely consider 'money'; or they experience a 'subjective' perception of money. We find a large dominance of risk-seeking behaviors, if observed through the phenomenology of money, independently from the risk measure used. Conversely, the same individuals appear risk averter, when values include the subjective experiences, and risk is assumed to be mentally projected with standard deviation formula. These results are consistent for sub-groups of individuals, by gender, age, education and profession. Implications are severe, as a sign of unawareness of behavior under risk.
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