Multivariate stochastic dominance for risk averters and risk seekers

Guo, Xu; Wong, Wing-Keung

doi:10.1051/ro/2016026

Guo, Xu ^1,² ; Wong, Wing-Keung ^3,^4,⁵

¹ School of Statistics, Beijing Normal University, Beijing, P.R. China.
² College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 210016, P.R. China.
³ Department of Finance, Asia University, Taiwan.
⁴ Faculty of Economics, Hong Kong Baptist University, Hong Kong, P.R. China.
⁵ Department of Economics, Lingnan University, Hong Kong, P.R. China.

RAIRO - Operations Research - Recherche Opérationnelle, Tome 50 (2016) no. 3, pp. 575-586.

Résumé

This paper first extends some well-known univariate stochastic dominance results to multivariate stochastic dominances (MSD) for both risk averters and risk seekers, respectively, to $n$ order for any $n \geq 1$ when the attributes are assumed to be independent and the utility is assumed to be additively and separable. Under these assumptions, we develop some properties for MSD for both risk averters and risk seekers. For example, we prove that MSD are equivalent to the expected-utility maximization for both risk averters and risk seekers, respectively. We show that the hierarchical relationship exists for MSD. We establish some dual relationships between the MSD for risk averters and risk seekers. We develop some properties for non-negative combinations and convex combinations random variables of MSD and develop the theory of MSD for the preferences of both risk averters and risk seekers on diversification. At last, we discuss some MSD relationships when attributes are dependent and discuss the importance and the use of the results developed in this paper.

Reçu le : 2015-02-25
Accepté le : 2016-03-29

MR Zbl

DOI : 10.1051/ro/2016026

Classification : D81, G11
Mots-clés : Multivariate stochastic dominance, risk averters, risk seekers, ascending stochastic dominance, descending stochastic dominance, utility function

Affiliations des auteurs :

Guo, Xu ^{1, 2} ; Wong, Wing-Keung ^{3, 4, 5}

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Guo, Xu; Wong, Wing-Keung. Multivariate stochastic dominance for risk averters and risk seekers. RAIRO - Operations Research - Recherche Opérationnelle, Tome 50 (2016) no. 3, pp. 575-586. doi : 10.1051/ro/2016026. http://www.numdam.org/articles/10.1051/ro/2016026/

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