A comparison of stochastic dominance and stochastic programming

R Burr Porter

Omega, 1974, vol. 2, issue 1, 105-117

Abstract: A substantial number of papers in recent years have been devoted to various programming models for making optimal financial decisions under conditions of uncertainty.1 The purpose of this paper is to: 1. 1. Examine the suitability of the major stochastic programming models proposed for solving the capital budgeting problem.2. 2. Consider the relative advantages and disadvantages of employing the stochastic dominance criteria to the same problem.3. 3. Suggest additional areas for investigation. The main conclusion is that any corporate financial decision rule based on mathematical programming under uncertainty contains a limited and potentially suboptimal view of risk. In contrast, financial decision rules employing stochastic dominance criteria, though subject to some inconvenience of application, never provide an incorrect evaluation of the risk of a set of projects. Our references make no effort to cover even a majority of the papers related to the subject, but rather are limited to relatively few articles that have been most helpful to us in gaining our current perspective.

Date: 1974
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/0305-0483(74)90010-3
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jomega:v:2:y:1974:i:1:p:105-117

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

Access Statistics for this article

Omega is currently edited by B. Lev

More articles in Omega from Elsevier
Bibliographic data for series maintained by Catherine Liu ().