Decreasing higher-order absolute risk aversion and higher-degree stochastic dominance

Denuit, Michel;Liu, Liqun
(2013) , 8 pages

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  • Denuit, MichelUCLouvain
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  • Liu, LiqunTexas A M University , College Station, TX, USA
    Author
Abstract
Fishburn and Vickson (1978) showed that, when applied to random alternatives with an equal mean, 3rd-degree and DARA stochastic dominances represent equivalent rules. The present paper generalizes this result to higher degrees. Specifically, higher-degree stochastic dominance rules and common preference by all decision makers with decreasing higher-order absolute risk aversion are shown to coincide under appropriate constraints on the respective moments of the random variables to be compared.
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Denuit, M., & Liu, L. (2013). Decreasing higher-order absolute risk aversion and higher-degree stochastic dominance (ISBA Discussion Paper 2013/07). https://hdl.handle.net/2078.5/207134