Moment Conditions for Almost Stochastic Dominance
13 Pages Posted: 26 Nov 2013
Date Written: November 25, 2013
This study establishes necessary conditions for Almost Stochastic Dominance criteria of various orders. These conditions take the form of restrictions on algebraic combinations of moments of the probability distributions in question. The relevant set of conditions depends on the relevant order of ASD but not on the critical value for the admissible violation area. These conditions can help to reduce the information requirement and computational burden in practical applications. A numerical example and an empirical application to historical stock market data illustrate the moment conditions. The first four moment conditions in particular seem appealing for many applications.
Keywords: decision theory; utility theory; stochastic dominance; necessary conditions; moments.
JEL Classification: C00, D81, G11.
Suggested Citation: Suggested Citation