Linear Tests for Decreasing Absolute Risk Aversion Stochastic Dominance

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11320%2F15%3A10313817" target="_blank" >RIV/00216208:11320/15:10313817 - isvavai.cz</a>
Result on the web
<a href="http://dx.doi.org/10.1287/mnsc.2014.1960" target="_blank" >http://dx.doi.org/10.1287/mnsc.2014.1960</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1287/mnsc.2014.1960" target="_blank" >10.1287/mnsc.2014.1960</a>

Result language
angličtina
Original language name
Linear Tests for Decreasing Absolute Risk Aversion Stochastic Dominance
Original language description
We develop and implement linear formulations of convex stochastic dominance relations based on decreasing absolute risk aversion (DARA) for discrete and polyhedral choice sets. Our approach is based on a piecewise-exponential representation of utility and a local linear approximation to the exponentiation of log marginal utility. An empirical application to historical stock market data suggests that a passive stock market portfolio is DARA stochastic dominance inefficient relative to concentrated portfolios of small-cap stocks. The mean-variance rule and Nth-order stochastic dominance rules substantially underestimate the degree of market portfolio inefficiency because they do not penalize the unfavorable skewness of diversified portfolios, in violation of DARA.
Czech name
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Czech description
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Type
J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)
CEP classification
BB - Applied statistics, operational research
OECD FORD branch
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Project
<a href="/en/project/GBP402%2F12%2FG097" target="_blank" >GBP402/12/G097: DYME-Dynamic Models in Economics</a><br>
Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year
2015
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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