Author : Yi Fang
Publisher :
ISBN 13 :
Total Pages : 32 pages
Book Rating : 4.:/5 (13 download)
Book Synopsis Higher Order Stochastic Dominance and Aggregate Investor Preferences by : Yi Fang
Download or read book Higher Order Stochastic Dominance and Aggregate Investor Preferences written by Yi Fang and published by . This book was released on 2016 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper finds necessary and sufficient conditions of Nth-order stochastic dominance (SD) for risk aversion and develops linear tests for Nth-order SD. We introduce a linear FDSD (fourth-order SD and decreasing absolute risk aversion SD) test for standard risk aversion. A positive research shows that higher order risk attitude cannot explain pricing errors of the small size and high value benchmark portfolios. The empirical results also suggests that any Nth-order SD criterion might not be superior to MV rule when the MV kernel does not violate non-satiation. FDSD has the best discriminate power and substantially improves the pricing kernel.