It is well-known that under some conditions, the mean-variance rule is equivalent to stochastic dominance rule. Some academics hypothesize that there could exist mean-Omega ratio rule that could be equivalent to stochastic dominance rule under certain conditions. To explore this possible, in...

This paper is on decision theoretical foundations for various types of VaR models, including VaR and conditional-VaR, as objective measures of downside risk for financial prospects. We establish the connections of the VaRs with the first- and the second-order stochastic dominance investment...

Both stochastic dominance and Omegaratio can be used to examine whether the market is efficient, whether there is any arbitrage opportunity in the market and whether there is any anomaly in the market. In this paper, we first study the relationship between stochastic dominance and the Omega...

This paper studies the impact of uncertainty on cross-border investments. We build a data set of firm-level outward Foreign Direct Investments between 2000 and 2015. We create a time and country varying measure of uncertainty based on the dispersion of idiosyncratic investment returns. An...

This paper investigates the prediction power of Economic Policy Uncertainty on three aspects of Bitcoin, particularly the return, volume, and volatility. We employed the Transfer Entropy model with two different regimes: (i) stationary and (ii) non-stationary assumption. We constructed different...

Expected utility functions are limited to second-order (conditional) risk aversion, while non-expected utility functions can exhibit either first-order or second-order (conditional) risk aversion. We extend the concept of orders of conditional risk aversion to orders of conditional dependent...

The distinction of risk vs uncertainty as made by Knight has important implications for policy selection. Assuming the former when the latter is relevant can lead to wrong decisions. With the aid of a stylized model that describes a bank's decision on how to allocate loans, we discuss decision...

If two investments have the same payoff covariance with the market but one has higher expected payoff, which asset according to the CAPM has most risk? One answer is that as far as risk goes the two assets are the same, because they have the same covariance with the market. The correct answer,...

This article aims to build through the collection of inputs from prior research, regulatory input and practitioner's experience, a comprehensive definition of risk.Risk is not measurable uncertainty nor volatility. Risk is a three part concept: (1) risk is the potential that events may have an...

We study the effect of an asymmetric environment on risk sharing. In our model, entrepreneurs consider undertaking risky projects in the real sector as well as selling part of their projects to investors. To capture the idea of an asymmetric environment, the returns on the alternative risk-free...