Almost Stochastic Dominance and Moments

Xu Guo, Wing-Keung Wong and Lixing Zhu

MPRA Paper from University Library of Munich, Germany

Abstract: This paper first extends the theory of almost stochastic dominance (ASD) to the first four orders. We then establish some equivalent relationships for the first four orders of the ASD. Using these results, we prove formally that the ASD definition modified by Tzeng et al.\ (2012) does not possess any hierarchy property. Thereafter, we conclude that when the first four orders of ASD are used in the prospects comparison, risk-averse investors prefer the one with positive gain, smaller variance, positive skewness, and smaller kurtosis. This information, in turn, enables decision makers to determine the ASD relationship among prospects when they know the moments of the prospects. At last, we discuss the necessary and sufficient conditions for different orders the ASD and the moments of the prospects.

Keywords: Stochastic dominance; almost stochastic dominance; risk aversion, mean, variance, skewness (search for similar items in EconPapers)
JEL-codes: C0 D81 G11 (search for similar items in EconPapers)
Date: 2013-08-21
New Economics Papers: this item is included in nep-mic, nep-ore and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Almost Stochastic Dominance and Moments (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:49274

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