An improved criterion for almost marginal conditional stochastic dominance

IF 1.9 Q2 BUSINESS, FINANCE Review of Quantitative Finance and Accounting Pub Date : 2024-01-13 DOI:10.1007/s11156-023-01235-3

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Abstract

We contribute to redefining the criteria based on Almost Stochastic Dominance for better portfolio comparison in four ways. First, we refine the first order of Marginal Conditional Stochastic Dominance (Yitzhaki and Olkin in Concentration indices and concentration curves, Vol 19, Lecture notes-monograph series: stochastic orders and decision under risk, 1991; Shalit and Yitzhaki in Manag Sci 40(5):670–684, 1994), which is designed for pairwise asset comparison. Second, we redefine Almost Marginal Conditional Stochastic Dominance (AMCSD) by Denuit et al. (J Bank Finance 41:57–66, 2014) and Chen et al. (Q Rev Econ Finance 85 (C):260–269, 2022), which considers multiple asset changes in a portfolio, especially in the case of second-order stochastic dominance. Our effort secures the hierarchy property (Guo et al. in Econ Lett 121:252–256, 2013) which is absent in previous studies. Third, we extend the analysis of multiple assets and apply our AMCSD definition and Marginal Conditional Stochastic Dominance. Our AMCSD treatment is confirmed to be more appropriate than those in previous study. Finally, for the sake of portfolio risk management, we compose three hypothetical portfolios with option-based indices for empirical analysis. The empirical outcomes support our efforts.

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几乎边际条件随机优势的改进标准

摘要我们从四个方面重新定义了基于几乎随机优势的标准，以便更好地进行投资组合比较。首先，我们完善了边际条件随机优势的第一阶（Yitzhaki 和 Olkin 在《集中指数和集中曲线》中，第 19 卷，讲义-专著系列：风险下的随机秩序和决策，1991 年；Shalit 和 Yitzhaki 在 Manag Sci 40(5):670-684, 1994 年），它是为成对资产比较而设计的。其次，我们重新定义了 Denuit 等人（J Bank Finance 41:57-66, 2014）和 Chen 等人（Q Rev Econ Finance 85 (C):260-269, 2022）提出的几乎边际条件随机支配（AMCSD），它考虑了投资组合中的多种资产变化，尤其是在二阶随机支配的情况下。我们的努力确保了层次属性（Guo et al. in Econ Lett 121:252-256，2013），而这在之前的研究中是没有的。第三，我们扩展了对多种资产的分析，并应用了我们的 AMCSD 定义和边际条件随机支配。与之前的研究相比，我们的 AMCSD 处理方法更合适。最后，为了进行投资组合风险管理，我们用基于期权的指数组成了三个假设投资组合进行实证分析。实证结果支持了我们的努力。

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来源期刊

Review of Quantitative Finance and Accounting BUSINESS, FINANCE-

CiteScore

3.20

自引率

17.60%

发文量

期刊介绍： Review of Quantitative Finance and Accounting deals with research involving the interaction of finance with accounting, economics, and quantitative methods, focused on finance and accounting. The papers published present useful theoretical and methodological results with the support of interesting empirical applications. Purely theoretical and methodological research with the potential for important applications is also published. Besides the traditional high-quality theoretical and empirical research in finance, the journal also publishes papers dealing with interdisciplinary topics.