Stochastic dominance theory for location-scale family
Summary: \textit{J. Meyer] [Am. Econ. Rev. 77, No. 3, 421--430 (1987)] extended the theory of mean-variance criterion to include the comparison among distributions that differ only by location and scale parameters and to include general utility functions with only convexity or concavity restrictions. In this paper, we make some comments on Meyer's paper and extend the results from \textit{J. Tobin} [Rev. Econ. Stud. 25, No. 2, 65--86 (1958)] that the indifference curve is convex upwards for risk averters, concave downwards for risk lovers, and horizontal for risk neutral investors to include the general conditions stated by Meyer [loc. cit.]. We also provide an alternative proof for the theorem. \textit{H. Levy} [Am. Econ. Rev. 79, No. 3, 597--600 (1989)] extended Meyer's results by introducing some inequality relationships between the stochastic-dominance and the mean-variance efficient sets. In this paper, we comment on Levy's findings and show that these relationships do not hold in certain situations. We further develop some properties among the first- and second-degree stochastic dominance efficient sets and the mean-variance efficient set.}
scientific article; zbMATH DE number 5369125