A Note on Almost Stochastic Dominance
AbstractTo satisfy the property of expected-utility maximization, Tzeng et al. (2012) modify the almost second-degree stochastic dominance proposed by Leshno and Levy (2002) and define almost higher-degree stochastic dominance. In this note, we further investigate the relevant properties. We define an almost third-degree stochastic dominance in the same way that Leshno and Levy (2002) define second-degree stochastic dominance and show that Leshno and Levy's (2002) almost stochastic dominance has the hierarchy property but not expected-utility maximization. In contrast, Tzeng et al.'s (2012) definition has the property of expected-utility maximization but not the hierarchy property. This phenomenon also holds for higher-degree stochastic dominance for these two concepts. Thus, the findings in this paper suggest that Leshno and Levy's (2002) definitions of ASSD and ATSD might be better than those defined by Tzeng et al. (2012) if the hierarchy property is considered to be an important issue.
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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 44365.
Date of creation: 10 Feb 2013
Date of revision:
Almost stochastic dominance; expected-utility maximization; hierarchy of stochastic dominance;
Other versions of this item:
- C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-16 (All new papers)
- NEP-MIC-2013-03-16 (Microeconomics)
- NEP-ORE-2013-03-16 (Operations Research)
- NEP-UPT-2013-03-16 (Utility Models & Prospect Theory)
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.:
- Louis Eeckhoudt & Harris Schlesinger, 2006.
"Putting Risk in Its Proper Place,"
American Economic Review,
American Economic Association, vol. 96(1), pages 280-289, March.
- EECKHOUDT, Louis & SCHLESINGER, Harris, . "Putting risk in its proper place," CORE Discussion Papers RP -1871, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Louis Eeckhoudt & Harris Schlesinger, 2005. "Putting Risk in its Proper Place," CESifo Working Paper Series 1462, CESifo Group Munich.
- Michel M. Denuit & Louis Eeckhoudt, 2010.
"A General Index of Absolute Risk Attitude,"
INFORMS, vol. 56(4), pages 712-715, April.
- Levy, Moshe, 2009. "Almost Stochastic Dominance and stocks for the long run," European Journal of Operational Research, Elsevier, vol. 194(1), pages 250-257, April.
- Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.