Moment Conditions for Almost Stochastic Dominance
AbstractThis study establishes necessary conditions for Almost Stochastic Dominance criteria of various orders. These conditions take the form of restrictions on algebraic combinations of moments of the probability distributions in question. The relevant set of conditions depends on the relevant order of ASD but not on the critical value for the admissible violation area. These conditions can help to reduce the information requirement and computational burden in practical applications. A numerical example and an empirical application to historical stock market data illustrate the moment conditions. The first four moment conditions in particular seem appealing for many applications.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 51725.
Date of creation: 26 Nov 2013
Date of revision:
decision theory; utility theory; stochastic dominance; necessary conditions; moments.;
Find related papers by JEL classification:
- C00 - Mathematical and Quantitative Methods - - General - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-29 (All new papers)
- NEP-ORE-2013-12-29 (Operations Research)
- NEP-UPT-2013-12-29 (Utility Models & Prospect Theory)
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