Kappa ratios and (higher-order) stochastic dominance

Cuizhen Niu, Wing-Keung Wong and Qunfang Xu
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Cuizhen Niu: Beijing Normal University
Qunfang Xu: Ningbo University

Risk Management, 2017, vol. 19, issue 3, No 4, 245-253

Abstract: Abstract This paper first shows the sufficient relationship between the $$(n+1)$$ ( n + 1 ) -order SD and the n-order Kappa ratio. In fact, we clarify the restrictions on necessary beating of the target for the higher-order SD consistency of the Kappa ratios. Thereafter, we show that, in general, the necessary relationship between SD/RSD and the Kappa ratio cannot be established. We find that when the variables being compared belong to the same location-scale family or the same linear combination of location-scale families, we can get the necessary relationship between the $$(n+1)$$ ( n + 1 ) -order SD with the n-order Kappa ratio after imposing some conditions on the means. Our findings enable academics and practitioners to draw better decision in their analysis.

Keywords: Stochastic dominance; Kappa ratio; Omega ratio; Sortino ratio; Mean-risk analysis; Risk aversion (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (32)

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DOI: 10.1057/s41283-017-0020-1

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