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Stochastic Dominance

Author: Haim Levy

Description

Stochastic dominance is a form of stochastic ordering. The term is used in decision theor and decision analysis to refer to situations where one gamble (a probability distributionover possible outcomes, also known as prospects) can be ranked as superior to another gamble. It is based on preferences regarding outcomes. A preference might be a simple ranking of outcomes from favorite to least favored, or it might also employ a value measure (i.e., a number associated with each outcome that allows comparison of multiples of one outcome with another, such as two instances of winning a dollar vs. one instance of winning two dollars.)

 

Keywords

Decision Making Investment Stochastic Dominance Haim Levy Measurement Risk Measures Domar Musgrave Risk Indexes Roy's Safety First Rule Dispersion Variance Standard Deviation Semi-variance Baumol's Risk Risk Measure VaR( Shortfall VaR Utility Theory Investment Criteria MRC MERC MEUC Axioms Optimal Decision Rule Expected Utility Utility Function Utility Units Inefficient Sets Sets Objective Decision Subjective Decision FSD First Degree Stochastic Dominance Probability Function Density Function Cumulating Probability Function FSD Rule Graphical Exposition Optimal Rule Sufficient Rules Necessary Rules Second Degree Stochastic Dominance SSD Risk Aversion Third Degree Stochastic Dominance DARA DARA Utility Equal Mean Distributions RSSD Risk-seeking Graphical Exposition n^^ Order Discrete Distributions Distribution Quantile Quantiles Capital Market Algorithms FSD Algorithm SSD Algorithm TSD Algorithm SDR Algorithms Specific Distributions Lognormal Distributions Empirical Studies Decision Rules Transaction Costs.Stochastic Dominance Rules Capital Structure SD Rules Bankruptcy Probability Agricultural Economics Agricultural Economics Diversification Arrow's Condition Investment Horizon M-V Portfolios CAPM Dominance ASD FSD Violation Prospect Theory CPT M-V

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