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An Empirical Comparison of Stochastic Dominance and Mean-Variance Portfolio Choice Criteria

Published online by Cambridge University Press:  19 October 2009

R. Burr Porter
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Extract

An important issue in the financial literature concerns the conflict between the stochastic dominance (SD) and the mean-variance (EV) methods of choosing optimal portfolios of risky assets. Much of the recent theoretical and empirical work in portfolio analysis has been devoted to the extension and testing of the Markowitz two-moment model, in which it is assumed that either (a) decision makers have quadratic utility functions with negative second derivatives or (b) the probability functions are from some appropriate two-parameter family and the investor is risk averse.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 8 , Issue 4 , September 1973 , pp. 587 - 608
Copyright
Copyright © School of Business Administration, University of Washington 1973

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