Advanced Search
MyIDEAS: Login to save this article or follow this journal

Almost marginal conditional stochastic dominance


Author Info

  • Denuit, Michel M.
  • Huang, Rachel J.
  • Tzeng, Larry Y.
  • Wang, Christine W.


Marginal Conditional Stochastic Dominance (MCSD) developed by Shalit and Yitzhaki (1994) gives the conditions under which all risk-averse individuals prefer to increase the share of one risky asset over another in a given portfolio. In this paper, we extend this concept to provide conditions under which most (and not all) risk-averse investors behave in this way. Instead of stochastic dominance rules, almost stochastic dominance is used to assess the superiority of one asset over another in a given portfolio. Switching from MCSD to Almost MCSD (AMCSD) helps to reconcile common practices in asset allocation and the decision rules supporting stochastic dominance relations. A financial application is further provided to demonstrate that using AMCSD can indeed improve investment efficiency.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 41 (2014)
Issue (Month): C ()
Pages: 57-66

as in new window
Handle: RePEc:eee:jbfina:v:41:y:2014:i:c:p:57-66

Contact details of provider:
Web page:

Related research

Keywords: Marginal conditional stochastic dominance; Almost stochastic dominance; Asset allocation; Optimal investment;

Find related papers by JEL classification:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Clark, Ephraim & Kassimatis, Konstantinos, 2012. "An empirical analysis of marginal conditional stochastic dominance," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(4), pages 1144-1151.
  2. Louis Eeckhoudt & Harris Schlesinger, 2006. "Putting Risk in Its Proper Place," American Economic Review, American Economic Association, American Economic Association, vol. 96(1), pages 280-289, March.
  3. Hadar, Josef & Seo, Tae Kun, 1988. "Asset Proportions in Optimal Portfolios," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 55(3), pages 459-68, July.
  4. Haim Shalit & Shlomo Yitzhaki, 2003. "An Asset Allocation Puzzle: Comment," American Economic Review, American Economic Association, American Economic Association, vol. 93(3), pages 1002-1008, June.
  5. Bali, Turan G. & Demirtas, K. Ozgur & Levy, Haim & Wolf, Avner, 2009. "Bonds versus stocks: Investors' age and risk taking," Journal of Monetary Economics, Elsevier, Elsevier, vol. 56(6), pages 817-830, September.
  6. Haim Shalit & Shlomo Yitzhaki, 2010. "How does beta explain stochastic dominance efficiency?," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 35(4), pages 431-444, November.
  7. Moshe Leshno & Haim Levy, 2002. "Preferred by "All" and Preferred by "Most" Decision Makers: Almost Stochastic Dominance," Management Science, INFORMS, INFORMS, vol. 48(8), pages 1074-1085, August.
  8. K. Victor Chow, 2001. "Marginal Conditional Stochastic Dominance, Statistical Inference, And Measuring Portfolio Performance," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 24(2), pages 289-307, 06.
  9. Clark, Ephraim & Jokung, Octave & Kassimatis, Konstantinos, 2011. "Making inefficient market indices efficient," European Journal of Operational Research, Elsevier, Elsevier, vol. 209(1), pages 83-93, February.
  10. Ephraim Clark & Konstantinos Kassimatis, 2013. "International equity flows, marginal conditional stochastic dominance and diversification," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 40(2), pages 251-271, February.
  11. Schechtman, Edna & Shelef, Amit & Yitzhaki, Shlomo & Zitikis, Ričardas, 2008. "Testing Hypotheses About Absolute Concentration Curves And Marginal Conditional Stochastic Dominance," Econometric Theory, Cambridge University Press, vol. 24(04), pages 1044-1062, August.
  12. Haim Shalit & Shlomo Yitzhaki, 1994. "Marginal Conditional Stochastic Dominance," Management Science, INFORMS, INFORMS, vol. 40(5), pages 670-684, May.
  13. Lizyayev, Andrey & Ruszczyński, Andrzej, 2012. "Tractable Almost Stochastic Dominance," European Journal of Operational Research, Elsevier, Elsevier, vol. 218(2), pages 448-455.
Full references (including those not matched with items on IDEAS)



This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:41:y:2014:i:c:p:57-66. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.