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IMPROVING THE MEAN‐VARIANCE CRITERION USING STOCHASTIC DOMINANCE
Author(s) -
LaCava Gerald J.
Publication year - 1976
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1976.tb00655.x
Subject(s) - stochastic dominance , variance (accounting) , estimator , econometrics , statistics , mathematics , dominance (genetics) , scale (ratio) , probability distribution , economics , biochemistry , chemistry , physics , accounting , quantum mechanics , gene
The increased importance of the nonnormal stable Paretian distributions necessitates the development of an investment criterion which does not depend upon the mean and variance. This paper develops a criterion based upon the location and scale parameters of a probability distribution. The rationale of the criterion is established using stochastic dominance orderings of probability distributions. The paper also presents estimators for the location and scale parameters.