An improved criterion for almost marginal conditional stochastic dominance

Liu，Wei Han1; Chang，Jow Ran2; Yang，Guo Jun3

2024

10.1007/s11156-023-01235-3

Review of Quantitative Finance and Accounting   影响因子和分区

0924-865X

1573-7179

We contribute to redefining the criteria based on Almost Stochastic Dominance for better portfolio comparison in four ways. First, we refine the first order of Marginal Conditional Stochastic Dominance (Yitzhaki and Olkin in Concentration indices and concentration curves, Vol 19, Lecture notes-monograph series: stochastic orders and decision under risk, 1991; Shalit and Yitzhaki in Manag Sci 40(5):670–684, 1994), which is designed for pairwise asset comparison. Second, we redefine Almost Marginal Conditional Stochastic Dominance (AMCSD) by Denuit et al. (J Bank Finance 41:57–66, 2014) and Chen et al. (Q Rev Econ Finance 85 (C):260–269, 2022), which considers multiple asset changes in a portfolio, especially in the case of second-order stochastic dominance. Our effort secures the hierarchy property (Guo et al. in Econ Lett 121:252–256, 2013) which is absent in previous studies. Third, we extend the analysis of multiple assets and apply our AMCSD definition and Marginal Conditional Stochastic Dominance. Our AMCSD treatment is confirmed to be more appropriate than those in previous study. Finally, for the sake of portfolio risk management, we compose three hypothetical portfolios with option-based indices for empirical analysis. The empirical outcomes support our efforts.

Almost stochastic dominance Asset allocation Marginal conditional stochastic dominance Optimal investment Option-based strategy index

ESCI

英语

第一

2-s2.0-85182144613

Scopus

1.Department of Finance,Southern University of Science and Technology,Shenzhen,No 1088, Xueyuan Rd., Xili, Nanshan District, Guangdong,518055,China
2.Department of Quantitative Finance,National Tsing Hua University,Hsinchu,No. 101, Section 2, Kuang-Fu Road,30013,Taiwan
3.Postal Scientific Research and Planning Institute Limited,Haidian District,Beijing,No.65 Jiancaicheng West Road, Xisanqi,100096,China

Liu，Wei Han,Chang，Jow Ran,Yang，Guo Jun. An improved criterion for almost marginal conditional stochastic dominance[J]. Review of Quantitative Finance and Accounting,2024.

Liu，Wei Han,Chang，Jow Ran,&Yang，Guo Jun.(2024).An improved criterion for almost marginal conditional stochastic dominance.Review of Quantitative Finance and Accounting.

Liu，Wei Han,et al."An improved criterion for almost marginal conditional stochastic dominance".Review of Quantitative Finance and Accounting (2024).