Return and risk are two important attribute of any portfolio. On likes to max return by keeping at a given level or min risk by keeping return at a min level. Or one takes a composite of return and take negative of risk aversion factor multiplied by risk of a portfolio and max it subject to wealth constraint (this is the traditional mean-variance approach: see Subramanyam and Patel () and Shama and Pankaj ()). In this model the risk aversion factor remains the same whatever be the wealth available with the decision maker. It is well known that as wealth of an individual increases his risk proneness also increases. This aspect is considered in the model that is presented in this paper by assuming that as wealth band changes, then also changes the risk aversion factor. Now we give two models of such situation that considers the mean-variance approach to portfolio selection, and conduct numerical investigation to see which of the two models do better.

Key Words
Behavioural Finance, Portfolio Optimization Problem and Mean Variance Approach