Asymptotic stochastic dominance rules for sums of i.i.d. random variables.

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F16%3A86094707" target="_blank" >RIV/61989100:27510/16:86094707 - isvavai.cz</a>
Result on the web
<a href="http://dx.doi.org/10.1016/j.cam.2015.12.017" target="_blank" >http://dx.doi.org/10.1016/j.cam.2015.12.017</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1016/j.cam.2015.12.017" target="_blank" >10.1016/j.cam.2015.12.017</a>

Result language
angličtina
Original language name
Asymptotic stochastic dominance rules for sums of i.i.d. random variables.
Original language description
In this paper, we deal with stochastic dominance rules under the assumption that the random variables are stable distributed. The stable Paretian distribution is generally used to model a wide range of phenomena. In particular, its use in several applicative areas is mainly justified by the generalized central limit theorem, which states that the sum of a number of i.i.d. random variables with heavy tailed distributions tends to a stable Paretian distribution. We show that the asymptotic behaviour of the tails is fundamental for establishing a dominance in the stable Paretian case. Moreover, we introduce a new weak stochastic order of dispersion, aimed at evaluating whether a random variable is more "risky" than another under condition of maximum uncertainty, and a stochastic order of asymmetry, aimed at evaluating whether a random variable is more or less asymmetric than another. The theoretical results are confirmed by a financial application of the obtained dominance rules. The empirical analysis shows that the weak order of risk introduced in this paper is generally a good indicator for the second order stochastic dominance.
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/GA15-23699S" target="_blank" >GA15-23699S: Risk Probability Functionals and Ordering Theory Applied to International Financial Markets and Portfolio Selection Problems</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year
2016
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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