Assuming that agents' preferences satisfy first-order stochastic dominance, we show that the Expected Utility Paradigm can explain all rational investment choices. In particular, the optimal investment strategy in any behavioral law-invariant  setting corresponds to the optimum for some risk averse expected utility maximizer whose concave utility function we derive explicitly . This result enables us to infer agents' utility and risk aversion  from their investment choice in a non-parametric way. We also show that decreasing absolute risk aversion (DARA)  is equivalent to a demand for  terminal wealth that has more spread than the opposite of the log pricing kernel at the investment horizon.
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the (Generalized) Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant (state-independent) setting corresponds to the optimum for a risk averse (generalized) expected utility maximizer with an explicitly derived concave utility function . This result enables us to infer the utility and risk aversion of agents from their investment choice in a non-parametric way. We relate the property of decreasing absolute risk aversion (DARA) to distributional properties of the terminal wealth and the financial market. Specifically, we show that DARA is equivalent to a demand for a terminal wealth that has more spread than the opposite of the log pricing kernel at the investment horizon.
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