Operational asymptotic stochastic dominance |
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| Institution: | 1. Department of Finance, National Central University, Taiwan;2. Department of Finance, National Taiwan University, Taiwan;3. Department of International Business, National Taiwan University, Taiwan;4. Chinese Academy of Mathematics and Systems Science, China;1. College of Auditing and Evaluation, Nanjing Audit University, Nanjing, Jiangsu Province, 211815, China;2. Schulich School of Business, York University, Toronto, Ontario M3J 1P3, Canada;3. Foisie Business School, Worcester Polytechnic Institute, Worcester, MA 01609, USA;1. School of Business, Stevens Institute of Technology, 1 Castle Point Terrace, Hoboken, NJ 07030, USA;2. Lally School of Management, Rensselaer Polytechnic Institute, 110 8th Street, Pittsburgh Building, Troy, NY 12180, USA;3. Division of Economic and Risk Analysis, US Securities and Exchange Commission, 100 F St NE, Washington DC 20549, USA;4. Department of Electrical, Computer & Systems Engineering, Rensselaer Polytechnic Institute, Jonsson Engineering Center 6048, Troy, NY 12180, USA;1. Carey Business School, Johns Hopkins University, 100 International Drive, Baltimore, MD 21202, United States;2. Department of Information Systems and Business Analytics, Florida International University, Miami, FL 33199, United States;1. Department of Industrial and Systems Engineering, Texas A&M University, College Station, TX, USA;2. School of Information Science and Technology, Osaka University, Suita, Japan;3. Department of Economics, Rice University, Houston, TX, USA;4. Department of Economics, University of Arkansas, Fayetteville, AR, USA;1. Leiden University Mathematical Institute, Niels Bohrweg 1, 2333 CA, Leiden, NL, UK;2. Department of Management Science, Center for Transportation and Logistics, Lancaster University Management School, Bailrigg, Lancaster LA1 4YX, UK;1. Department of Industrial Engineering, University of Houston, 4800 Calhoun Road, Houston, TX 77204, USA;2. PROS Revenue Management, Houston, TX 77002, USA;3. Department of Radiation Physics, The University of Texas MD Anderson Cancer Center, Houston, TX 77030, USA |
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| Abstract: | Levy (2016) proposes asymptotic first-degree stochastic dominance as a distribution ranking criterion for all non-satiable decision makers with infinite investment horizons. Given Levy’s setting, this paper defines and offers the equivalent distributional conditions for asymptotic second-degree stochastic dominance, as well as operational asymptotic first- and second-degree stochastic dominance. Interestingly, the operational asymptotic stochastic dominance provides a full rank over assets with lognormal returns and different means. Empirical applications show that our conditions can be readily implemented in practice. |
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