Almost marginal conditional stochastic dominance

详细信息    查看全文

• 作者：Michel M. Denuit^a ; Rachel J. Huang^b ; ¹ ; ^{rachel@mail.ntust.edu.tw" class="auth_mail} ; Larry Y. Tzeng^c ; ¹ ; Christine W. Wang^c
• 关键词：D81
• 刊名：Journal of Banking and Finance
• 出版年：April, 2014
• 年：2014
• 卷：41
• 期：Complete
• 页码：57-66
• 全文大小：896 K

文摘

Marginal Conditional Stochastic Dominance (MCSD) developed by Shalit and Yitzhaki (1994) gives the conditions under which all risk-averse individuals prefer to increase the share of one risky asset over another in a given portfolio. In this paper, we extend this concept to provide conditions under which most (and not all) risk-averse investors behave in this way. Instead of stochastic dominance rules, almost stochastic dominance is used to assess the superiority of one asset over another in a given portfolio. Switching from MCSD to Almost MCSD (AMCSD) helps to reconcile common practices in asset allocation and the decision rules supporting stochastic dominance relations. A financial application is further provided to demonstrate that using AMCSD can indeed improve investment efficiency.