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Revisiting almost marginal conditional stochastic dominance

Author

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  • Chen, Tzu-Ying
  • Tsai, An-Mei
  • Tzeng, Larry Y.

Abstract

In this paper, we propose a new notion of the almost marginal conditional stochastic dominance rule by confining the ratio of marginal utility to exclude decision makers with extreme preferences. We show that this new rule can be implemented by linear programming. Finally, we demonstrate the application of this new rule by constructing a set of efficient portfolios characterized by US 10-year Treasuries, the Dow Jones US index, the Dow Jones US Islamic index and the Dow Jones Emerging Markets Islamic index.

Suggested Citation

  • Chen, Tzu-Ying & Tsai, An-Mei & Tzeng, Larry Y., 2022. "Revisiting almost marginal conditional stochastic dominance," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 260-269.
    • Handle: RePEc:eee:quaeco:v:85:y:2022:i:c:p:260-269
    DOI: 10.1016/j.qref.2022.03.010
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    More about this item

    Keywords

    Marginal conditional stochastic dominance; Almost stochastic dominance; Efficient portfolios;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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