STOCHASTIC DOMINANCE ON FTSE INDEX

Ioan-Alin Nistor (), Maria-Lenuta Ciupac-Ulici (), Mircea-Cristian Gherman () and Daniela-Georgeta Beju ()
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Ioan-Alin Nistor: Babes-Bolyai University, Cluj-Napoca, Romania
Maria-Lenuta Ciupac-Ulici: IPAG Business School Paris, France & Commercial Academy Satu Mare, Romania
Mircea-Cristian Gherman: Technical University of Cluj-Napoca, Romania
Daniela-Georgeta Beju: Babes-Bolyai University, Cluj-Napoca, Romania

JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, 2019

Abstract: Stochastic dominance is a method that refers to a set of relations, which may hold between a specific pair of distributions. However, the concept can be applied in many domains, but in particular in financial economic areas, where the considered distributions are usually those of random returns to different financial assets. The aim of this paper is to provide an implementation of a stochastic dominance algorithm that establish which of more risky indices is preferred more by investors who have an aversive risk profile. The study is performed on FTSE indices. The focus is to emphasis the imbalance between FTSE regional indices and FTSE sectorial indices. The analyzed period for regional indices is April 3, 2000 –September 12, 2014. As regards the sector indices, the analyzed period is January 3, 1994 – September 12, 2014.Its relevance consist in that, it offers a different perspective for investors when choosing between different financial assets. This approach together with Meyer algorithm has been proved that it is a useful tool in risk aversion analysis.

Keywords: stochastic dominance; utility function; FTSE index (search for similar items in EconPapers)
JEL-codes: C73 D53 D9 (search for similar items in EconPapers)
Date: 2019
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https://tbs.ubbcluj.ro/RePEc/bbn/journl/Negotia_4_2019.pdf Revised version, 2019 (application/pdf)

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