Third Degree Stochastic Dominance and Mean-Risk Analysis
AbstractIn their recent article, Ogryczak and Ruszczy\'nski (1999) proved that those portfolios associated with the efficient frontiers generated by mean-lower semi-standard deviation model and mean- (lower semi-)absolute deviation model are efficient in the sense of second degree stochastic dominance. This rather surprising result reveals the importance of lower partial risk models in portfolio analysis. In this paper, we extend the results of Ogryczak and Ruszczy\'nski for second degree stochastic dominance to third degree stochastic dominance. We show that portfolios on a significant portion of the efficient frontier generated by mean-lower semi-skewness model are efficient in the sense of third degree stochastic dominance. Also, we prove that the portfolios generated by mean-variance-skewness model are semi-efficient in the sense of third degree stochastic dominance.
Download InfoIf 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.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 46 (2000)
Issue (Month): 2 (February)
mean-risk analysis; second and third degree stochastic dominance; lower partial risk; lower semi-skewness; absolute deviation; mean-variance-skewness model;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Branda, Martin, 2013. "Diversification-consistent data envelopment analysis with general deviation measures," European Journal of Operational Research, Elsevier, vol. 226(3), pages 626-635.
- Jesus Gonzalo & Jose Olmo, 2008.
"Testing downside risk efficiency under market distress,"
Economics Working Papers
we084321, Universidad Carlos III, Departamento de Economía.
- Gonzalo, J. & Olmo, J., 2008. "Testing Downside Risk Efficiency Under Market Distress," Working Papers 08/11, Department of Economics, City University London.
- Gonzalo, Jesús & Olmo, José, . "Testing downside risk efficiency under market distress," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/2951, Universidad Carlos III de Madrid.
- Wing-Keung Wong & Raymond H. Chan, 2005.
"Prospect and Markowitz Stochastic Dominance,"
Departmental Working Papers
wp0505, National University of Singapore, Department of Economics.
- Walter Briec & Kristiaan Kerstens, 2009.
"Portfolio Selection in Multidimensional General and Partial Moment Space,"
2009-ECO-08, IESEG School of Management.
- Briec, Walter & Kerstens, Kristiaan, 2010. "Portfolio selection in multidimensional general and partial moment space," Journal of Economic Dynamics and Control, Elsevier, vol. 34(4), pages 636-656, April.
- Clasen, Christian & Griess, Verena C. & Knoke, Thomas, 2011. "Financial consequences of losing admixed tree species: A new approach to value increased financial risks by ungulate browsing," Forest Policy and Economics, Elsevier, vol. 13(6), pages 503-511, July.
- Wing-Keung Wong, 2007.
"Stochastic Dominance and Mean-Variance Measures of Profit and Loss for Business Planning and Investment,"
Finance Working Papers
21922, East Asian Bureau of Economic Research.
- Wong, Wing-Keung, 2007. "Stochastic dominance and mean-variance measures of profit and loss for business planning and investment," European Journal of Operational Research, Elsevier, vol. 182(2), pages 829-843, October.
- Wing-Keung Wong, 2007. "Stochastic Dominance and Mean-Variance Measures of Profit and Loss for Business Planning and Investment," SCAPE Policy Research Working Paper Series 0705, National University of Singapore, Department of Economics, SCAPE.
- Chan, Raymond H. & Clark, Ephraim & Wong, Wing-Keung, 2012. "On the Third Order Stochastic Dominance for Risk-Averse and Risk-Seeking Investors," MPRA Paper 42676, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If references are entirely missing, you can add them using this form.