Advanced Search
MyIDEAS: Login

Variance Covariance Orders and Median Preserving

Contents:

Author Info

  • Semyon MALAMUD

    (ETH Zurich and Swiss Finance Institute)

  • Fabio TROJANI

    (University of Lugano and Swiss Finance Institute)

Abstract

A random variable dominates another random variable with respect to the covariance order if the covariance of any two monotone increasing functions of this variable is smaller. We characterize completely the covariance order, give strong sufficient conditions for it, present a number of examples in concrete economic applications, and provide natural extensions for the multivariate context. In analogy to mean preserving spreads in standard stochastic dominance, we show that the covariance order is intimately linked to a comparison of median preserving spreads of random variables. Moreover, it arises naturally in a variety of important economic questions like, e.g., Hansen-Jagannathan stochastic discount factor bounds, the efficient portfolios implied by semi-variance optimization problems, or the measurement of macroeconomic inequality and dispersion in beliefs.

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: http://ssrn.com/abstract=1392728
Download Restriction: no

File URL:
Download Restriction: no

Bibliographic Info

Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 09-13.

as in new window
Length: 29 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:chf:rpseri:rp0913

Contact details of provider:
Web page: http://www.SwissFinanceInstitute.ch
More information through EDIRC

Related research

Keywords: variance; risk; median preserving spread; Hansen-Jagannathan bounds;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Leeat Yariv & Alessandro Lizzeri & Alberto Bisin, 2012. "Government Policy with Time Inconsistent Voters," 2012 Meeting Papers 92, Society for Economic Dynamics.

Lists

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

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:chf:rpseri:rp0913. 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: (Marilyn Barja).

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.