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Partial Stochastic Dominance

Author

Listed:
  • Takashi Kamihigashi

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

  • John Stachurski

    (Research School of Economics, Australian National University, Australia)

Abstract

The stochastic dominance ordering over probability distributions is one of the most familiar concepts in economic and financial analysis. One difficulty with stochastic dominance is that many distributions are not ranked at all, even when arbitrarily close to other distributions that are. Because of this, several measures of "partial" or "near" stochastic dominance have been introduced into the literature—albeit on a somewhat ad hoc basis. This paper argues that there is a single measure of extent of stochastic dominance that can be regarded as the most natural default measure from the perspective of economic analysis.

Suggested Citation

  • Takashi Kamihigashi & John Stachurski, 2014. "Partial Stochastic Dominance," Discussion Paper Series DP2014-23, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2014-23
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    References listed on IDEAS

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    More about this item

    Keywords

    Stochastic dominance; Stochastic order;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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