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Indexing gamble desirability by extending proportional stochastic dominance

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  • Hellman, Ziv
  • Schreiber, Amnon

Abstract

We characterise two new orders of desirability of gambles (risky assets) that are natural extensions of the stochastic dominance order to complete orders, based on choosing optimal proportions of gambles. These orders are represented by indices, which we term the S index and the G index, that are characterised axiomatically and by wealth and utility uniform dominance concepts. The S index can be viewed as a generalised Sharpe ratio, and the G index can be used for maximising the growth path of a portfolio.

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  • Hellman, Ziv & Schreiber, Amnon, 2018. "Indexing gamble desirability by extending proportional stochastic dominance," Games and Economic Behavior, Elsevier, vol. 109(C), pages 523-543.
    • Handle: RePEc:eee:gamebe:v:109:y:2018:i:c:p:523-543
    DOI: 10.1016/j.geb.2018.02.003
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    Cited by:

    1. Heller, Yuval & Schreiber, Amnon, 2020. "Short-term investments and indices of risk," Theoretical Economics, Econometric Society, vol. 15(3), July.
    2. Yuval Heller & Amnon Schreiber, 2020. "Short-Term Investments and Indices of Risk," Papers 2005.06576, arXiv.org.

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    More about this item

    Keywords

    Indices of riskiness; Risk aversion; Absolute risk; Relative risk;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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