Testing Descriptive Utility Theories: Violations of Stochastic Dominance and Cumulative Independence
Choices between gambles show systematic violations of stochastic dominance. For example, most people choose ($6, .05; $91, .03; $99, .92) over ($6, .02; $8, .03; $99 ...
Stochastic dominance provides a rigorous method to compare uncertain prospects without imposing restrictive assumptions on investor risk preferences, thus offering an alternative to traditional ...
Merton, Perrakis and Ryan, Levy, and Ritchken have established option pricing bounds under first and second stochastic dominance preferences. These bounds are particularly important for valuing ...
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