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Behaviour under uncertainty and rationality are obviously important topics for Finance and for Economics in general. Assumptions about rationality are the primitives of any economic theory and explanation. Around the mid 20th century, two famous economists, Von Neumann and Morgenstern, developed a theoretical approach to address rational behaviour under uncertainty. More exactly, they suggested that, if some axioms are respected, problems under uncertainty can be solved by evaluating the utility in different states multiplied by the probabilities of occurrence of the respective states. This approach is well-known as the expected utility theory (EUT, henceforth) and has become the main paradigm in Economics and Finance. It turns out, however, that individuals do not behave as the EUT...
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