In this note we analyze the composition of an optimal portfolio by considering the cumulative conditional expected outcome of two dependent assets. We develop a conditional stochastic dominance relation and show that for any concave von Neumann-Morgenstern utility function, the proportion of...

This paper uses the concept of Marginal Conditional Stochastic Dominance and a generalization of the 50% Portfolio Rule to develop a tractable and parsimonious methodology for constructing a second degree Stochastic Dominance (SSD) efficient portfolio from a given, inefficient index. Because the...

This paper examines the effect of prudentially obligated strategic institutional ownership on the performance of firm stock returns. Using the concept of marginal conditional stochastic dominance (MCSD), performance is measured to include the whole distribution of stock returns instead of...

This paper investigates how capital budgeting techniques that include the option to abandon can be exploited as management tools to aid not only in the invest/abandon decision but also in ongoing project management, financial forecasting and the timing of strategic moves. Three parameters are...

No abstract received.

The weak empirical evidence linking diversification and international equity flows calls into question the diversification paradigm at the international level and the analytical framework it implies. Using the concept of Marginal Conditional Stochastic Dominance (MCSD) to estimate the...

This paper investigates the effect of foreign currency (FC) derivative use on shareholder value. Exposures are broken down by currency, by whether the currency is appreciating or depreciating and by whether exposures are symmetric or asymmetric. We find that derivatives are effective in reducing...

This paper develops a model of regulated Brownian motion with an endogenous profit term to analyze the role of regulatory credibility on the stability and productivity of the banking system. We show that when regulatory intervention is perfect and costless, the volatility of the system can be...

type="main" xml:lang="en" <title type="main">Abstract</title> <p>We apply the stochastic dominance (SD) tests proposed by Linton et al. (2005) and Davidson and Duclos (2000) for risk averters and risk seekers to examine investors’ preferences with respect to the Taiwan stock index and its corresponding index futures. We...</p>

Stochastic dominance is a more general approach to expected utility maximization than the widely accepted mean–variance analysis. However, when applied to portfolios of assets, stochastic dominance rules become too complicated for meaningful empirical analysis, and, thus, its practical...