Full Citation

Title: Uncovering Latent Stochastic Dominance Relations Using Prior Rankings

Citation Type: Working Paper

Publication Year: 2019

ISBN:

ISSN: 1556-5068

DOI: 10.2139/ssrn.3442919

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Abstract: The discriminatory power of Stochastic Dominance analysis is enhanced using side information about the ranking of external prospects. Restricting risk preferences to be consistent with known rankings strengthens the stochastic order by uncovering latent dominance relations and reducing the number of undominated alternatives. To oper-ationalize the proposed approach, a tractable formulation is derived in terms of linear constraints on the Lower Partial Moments of the distribution functions. Representative applications to wellbeing analysis and portfolio optimization show substantial gains in ordering strength from using plausible side information about the ranking of simple prospects.

Url: https://ssrn.com/abstract=3442919

Url: https://www.ssrn.com/abstract=3442919

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Authors: Post, Thierry

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Data Collections: IPUMS CPS

Topics: Other

Countries: United States