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THE EFFECT OF ESTIMATION RISK IN PERFORMING STOCHASTIC DOMINANCE EFFICIENCY TESTS
Author(s) -
Ritchken Peter H.,
Gupta Alok
Publication year - 1984
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.1540-5915.1984.tb01238.x
Subject(s) - stochastic dominance , estimation , dominance (genetics) , variance (accounting) , econometrics , computer science , set (abstract data type) , sample (material) , statistics , mathematical optimization , risk analysis (engineering) , mathematics , economics , business , biochemistry , chemistry , management , accounting , chromatography , gene , programming language
In many applications involving the construction of efficient sets, the parameters of the alternatives are estimated using small examples. As a result, inefficient alternatives may be included in the sample efficient set and efficient alternatives left out. This paper investigates the effects of estimation risk when there are more than two alternatives and limited information. The study reveals that estimation risk is a severe handicap to the practical implementation of stochastic dominance and mean‐variance efficiency analysis.