Somewhere between Utopia and Dystopia: Choosing from Incomparable Prospects

34 Pages Posted: 9 Nov 2016 Last revised: 25 Feb 2017

See all articles by Gordon Anderson

Gordon Anderson

University of Toronto

Thierry Post

Graduate School of Business of Nazarbayev University

Yoon-Jae Whang

Seoul National University - School of Economics

Date Written: February 24, 2017

Abstract

For ranking incomparable prospects, a ‘Utopia Index’ measuring the proximity to a lower envelope of integrated distribution functions is proposed. The analysis generalizes the existing Almost Stochastic Dominance concept from pairwise comparison to a joint analysis of an arbitrary number of prospects. The exact limit distribution for the empirical counterpart of the index for a general class of dynamic processes is derived together with a feasible test procedure based on subsampling techniques, allowing for consistent statistical inference. To illustrate, empirical applications to Chinese household income data and historical investment returns data shows that, in every choice set, a single prospect is ranked above all alternatives at conventional significance levels.

Keywords: Almost Stochastic Dominance, Convex Stochastic Dominance, subsampling, wellbeing analysis, portfolio choice.

JEL Classification: C1, D6, G0, H0, I3

Suggested Citation

Anderson, Gordon John and Post, Thierry and Whang, Yoon-Jae, Somewhere between Utopia and Dystopia: Choosing from Incomparable Prospects (February 24, 2017). Available at SSRN: https://ssrn.com/abstract=2866510 or http://dx.doi.org/10.2139/ssrn.2866510

Gordon John Anderson

University of Toronto ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada

Thierry Post (Contact Author)

Graduate School of Business of Nazarbayev University ( email )

53 Kabanbay Batyra Avenue
Astana, 010000
Kazakhstan

Yoon-Jae Whang

Seoul National University - School of Economics ( email )

San 56-1, Silim-dong, Kwanak-ku
Seoul 151-742
Korea
+82 2 80 6362 (Phone)
+82 2 86 4231 (Fax)

HOME PAGE: http://plaza.snu.ac.kr/~whang

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