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Abstract We develop stochastic dominance tests of a given prospect compared with multiple choice alternatives. We account for all types of preferences. The tests are formulated in terms of linear… Click to show full abstract
Abstract We develop stochastic dominance tests of a given prospect compared with multiple choice alternatives. We account for all types of preferences. The tests are formulated in terms of linear as well as MIP models, and developed based on bayesian analysis, which relies on novel Markov Chain Monte Carlo procedures. Empirical results indicate that the market portfolio is Prospect stochastic dominance optimal. This implies that there are S-shaped utility functions that rationalize the market portfolio.
Keywords:
dominance tests;
dominance;
stochastic dominance
Journal Title: Journal of Economic Dynamics and Control
Year Published: 2020
Link to full text (if available)
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Journal Title: Journal of Economic Dynamics and Control
Year Published: 2020
Link to full text (if available)
Share on Social Media: Sign Up to like & get
recommendations!