Hostname: page-component-78c5997874-mlc7c Total loading time: 0 Render date: 2024-11-15T09:50:01.341Z Has data issue: false hasContentIssue false
  • English
  • Français

Comparison of Moment and Stochastic Dominance Ranking Methods

Published online by Cambridge University Press:  19 October 2009

William H. Jean
Get access Rights & Permissions [Opens in a new window]

Extract

Since the appearance in 1969 of Kadar and Russell's paper [1] and in 1970 of Whitmore's paper [4] extending stochastic dominance to the second and third degrees, a considerable interest has developed in stochastic dominance methods as an alternative to moment methods in investment ranking models. The particular attraction of stochastic dominance is that its results are consistent with the expected utility hypothesis without depending on a particular mathematical form of utility function or on a specific type of distribution of investment returns. Although both stochastic dominance ranking models and moment ranking models are based on probability distributions of investment returns, it has been difficult to relate the two types of models mathematically for a complete comparison of results. In this paper the common moments are expressed in terms of successive integrals of a probability density function to allow a systematic comparison of the two methods.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 10 , Issue 1 , March 1975 , pp. 151 - 161
Copyright
Copyright © School of Business Administration, University of Washington 1975

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Hadar, Josef, and Russell, William R.. “Rules for Ordering Uncertain Prospects.” American Economic Review, March 1969.Google Scholar
[2]Hadar, Josef, and Russell, William R.. “Stochastic Dominance and Diversification.” Journal of Economic Theory, September 1971.CrossRefGoogle Scholar
[3]Porter, R. Burr. “Semivariance and Stochastic Dominance: A Comparison.” American Economic Review, March 1974.Google Scholar
[4]Whitmore, G. A. “Third-Degree Stochastic Dominance.” American Economic Review, June 1970.Google Scholar