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- Title
A PARAMETRIC APPROACH TO STOCHASTIC DOMINANCE: THE LOGNORMAL CASE.
- Authors
Kroll, Yoram; Levy, Haim
- Abstract
Mixing the risky asset with the riskless asset, Levy and Kroll have developed stochastic dominance rules with borrowing and lending (SDR). These rules can be easily applied to discrete distributions (e.g. ex-post data). However, an infinite number of comparisons is involved when the distributions under consideration are continuous. This study suggests a method for applying the SDR criteria to continuous distributions where, in general, a small number of comparisons is involved. For some distributions (e.g. lognormal) the SDR relationship is stated in terms of the distributions' parameters, and hence only one comparison is required. These SDR relationships enable us to establish the lognormal efficient frontier.
- Subjects
ASSETS (Accounting); ACCOUNTING; LOGNORMAL distribution; DISTRIBUTION (Probability theory); MATHEMATICAL analysis; STOCHASTIC processes; RISK management in business; ASSET management; MANAGEMENT science
- Publication
Management Science, 1986, Vol 32, Issue 3, p283
- ISSN
0025-1909
- Publication type
Article
- DOI
10.1287/mnsc.32.3.283