Niu, Cuizhen and Wong, Wing-Keung and Xu, Qunfang
(2017):
*Higher-Order Risk Measure and (Higher-Order) Stochastic Dominance.*

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## Abstract

This paper extends the theory between Kappa ratio and stochastic dominance (SD) and risk-seeking SD (RSD) by establishing several relationships between first- and higher-order risk measures and (higher-order) SD and RSD. We first show the sufficient relationship between the (n+1)-order SD and the n-order Kappa ratio. We then find that, in general, the necessary relationship between SD/RSD and the Kappa ratio cannot be established. Thereafter, we find that when the variables being compared belong to the same location-scale family or the same linear combination of location-scale families, we can get the necessary relationships between the (n+1)-order SD with the n-order Kappa ratio when we impose some conditions on the means. Our findings enable academics and practitioners to draw better decision in their analysis.

Item Type: | MPRA Paper |
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Original Title: | Higher-Order Risk Measure and (Higher-Order) Stochastic Dominance |

English Title: | Higher-Order Risk Measure and (Higher-Order) Stochastic Dominance |

Language: | English |

Keywords: | Stochastic Dominance, Kappa ratio, Omega Ratio, Sortino ratio, mean-risk analysis, risk aversion, risk seeking |

Subjects: | C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty G - Financial Economics > G1 - General Financial Markets > G10 - General |

Item ID: | 75948 |

Depositing User: | Wing-Keung Wong |

Date Deposited: | 03 Jan 2017 11:31 |

Last Modified: | 30 Sep 2019 08:13 |

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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/75948 |