Safety-First, Stochastic Dominance, and Optimal Portfolio Choice

Vijay S. Bawa

Journal of Financial and Quantitative Analysis, 1978, vol. 13, issue 2, 255-271

Abstract: Stochastic Dominance rules are playing an increasingly prominent role in the literature on choice under uncertainty. Their foundation is the mainstream VonNeumann-Morgenstern expected utility paradigm. Their essence is to provide an admissible set of choices under restrictions on the utility functions that follow from prevalent and appealing modes of economic behavior: The admissible sets generated are useful for a large group of individual decision makers and the optimal choice for an individual can then be obtained from among the smaller set of admissible choices.

Date: 1978
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