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An Effective Algorithm for Estimating Stochastic Dominance Efficient Sets

Published online by Cambridge University Press:  06 April 2009

Richard B. Kearns  and
Richard C. Burgess
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Extract

An algorithm to estimate the composition of efficient sets by the stochastic dominance (SD) rules was developed and made available to the public by Porter, Wart, and Ferguson (PWF) [1]. Up to that time the computer central processing unit (CPU) time required for the determination of the SD efficient set was prohibitive for a large number of portfolios. The Porter, Wart, and Ferguson algorithm made possible studies that examined the performance of mutual funds, common stocks, and portfolios using the SD rules. Unfortunately, the FORTRAN program developed by PWF and titled D0MIN2 still requires a large amount of CPU time when the number of portfolios exceeds 100.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 14 , Issue 3 , September 1979 , pp. 547 - 552
Copyright
Copyright © School of Business Administration, University of Washington 1979

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References

REFERENCES

[1]Porter, R. Burr; Wart, James R.; and Ferguson, Donald L.. “Efficient Algorithms for Conducting Stochastic Dominance Tests on Large Numbers of Portfolios.” Journal of Financial and Quantitative Analysis, Vol. 8 (01 1973), pp. 71–81.CrossRefGoogle Scholar
[2]Hanoch, G., and Levy, H.. “The Efficiency of Choices Involving Risk.” The Review of Economic Studies, Vol. 36 (1969), pp. 335–346.CrossRefGoogle Scholar