Based on recent theoretical and empirical results about the significance of Cumulative Prospect Theory (CPT), we define RWcSD, an extended notion of stochastic dominance that accounts for both the reflection effect (R) and the probability weighting (Wc). A second definition of stochastic dominance (R∗W -SD) for preferences with reverse reflection effect (R*) as in Markowitz (1952) is presented....

Empirical research on Lower Partial Moment (LPM) has ignored its portfolio algorithms and the major benefit of such analysis: that its utility function is as general as the utility function assumed by stochastic dominance analysis. Since efficient algorithms for stochastic dominance do not exist, an LPM algorithm may be a viable substitute. This paper is concerned with the composition of portfo...

We break Theorem 3.2 into several smaller (sub-)theorems and prove each one separately. This is done in sections 1.1, 1.2, and 1.3, which state and discuss the theorems about stochastic dominance, Pareto improving pairs, and variance, respectively. The theorems stated in these sections are then proved separately in the later sections. Section 2 contains the proofs for stochastic dominance. Sect...

For any given order of stochastic dominance, standard concentration curves are decomposed into contribution curves corresponding to within-group inequalities, between-group inequalities, and transvariational inequalities. We prove, for all orders, that contribution curve dominance implies systematically welfare-improving tax reforms and conversely. Accordingly, we point out some undesirable fis...

In this problem Z0 is a convex closed subset of a Banach spaceZ , and G and H are continuous operators from Z to the space of integrable random variables L1(Ω,F , P). The random variable Y plays the role of a benchmark outcome. For example, one may set Y = G(z̄), where z̄ ∈ Z0 is some reasonable value of the decision vector, which is currently employed in the system. The relation (2) is the stoch...

This paper reviews the literature of partial poverty orderings. Partial poverty orderings require unanimous poverty rankings for a class of poverty measures or a set of poverty lines. The need to consider multiple poverty measures and multiple poverty lines arises inevitably from the arbitrariness inherent in poverty comparisons. In the paper, we first survey the ordering conditions of various ...

Extensions are presented to the results of Davidson and Duclos (2007), whereby the null hypothesis of restricted stochastic non dominance can be tested by both asymptotic and bootstrap tests, the latter having considerably better properties as regards both size and power. In this paper, the methodology is extended to tests of higherorder stochastic dominance. It is seen that, unlike the first-o...

Poverty dominance analysis uses stochastic dominance to provide rankings of distributions in terms of poverty which are not sensitive to the choice of poverty line. This analysis is carried out for Ireland using Household Budget Survey data for 1987 and 1994 including tests for the statistical significance of the results. We find that for a wide range of absolute poverty lines, poverty in Irela...