Demand for Risky Assets and Stochastic Dominance: A Note

Louis Eeckhoudt and Christian Gollier ()

Working Papers from Risk and Insurance Archive

Abstract: Since Fishburn and Porter [1976], it has been known that a first- order dominant shift in the distribution of random returns of an asset does not necessarily induce a risk-averse decision maker to increase his holdings of that improved asset. To obtain the desired comparative statics result, one has to further restrict the class of changes in the distribution. In this paper we propose the "monotone probability ratio" criterion which is more general than the "monotone likelihood ratio" criterion currently used in the literature.

Keywords: first-order stochastic dominance; portfolio problem; demand for insurance. (search for similar items in EconPapers)
Date: 1994-06
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Persistent link: https://EconPapers.repec.org/RePEc:wop:riskar:007

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