Ordering Uncertain Options With Borrowing and Lending

Levy, Haim; Kroll, Yoram

doi:10.1111/j.1540-6261.1978.tb04867.x

Cited by 93 publications

(10 citation statements)

References 30 publications

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“…However, Levy and Kroll (1978) prove that if one introduces a risk-free interest rate into the SSD mle, dominance can be detected even though it did not exist in the original SSD rule. In cases where the SSD rule indicates ADB, then the investor clearly prefers A to B.…”

Section: Stochastic Dominancementioning

confidence: 90%

“…Levy and Kroll (1978)^ prove that a necessary and sufficient condition for dominance of {Ac} over {Bp} for all nondecreasing and concave utility functions is: Accordingly, a retums distribution A can be transformed into a distribution /!".…”

Section: Stochastic Dominancementioning

confidence: 99%

“…In light of these results and noting that using p to measure abnormal retums relies on assumptions which, with short horizons (such as monthly retums) and individual securities, has a very low R'^ -four percent on average and sometimes less than one percent (Levy (1978)) -it is useful to also utilize another approach to examine this phenomenon. In this study we use a research method which relies on the second degree stochastic dominance criterion (briefly described in the following section).…”

mentioning

confidence: 99%

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Tests of the impact of LIFO adoption on stockholders: A stochastic dominance approach*

Aharony

Bar‐Yosef

1987

Contemporary Accting Res

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This study examines the possible economic impact of a firm's decision to switch its inventory costing to LIFO. The contradictory conclusions of previous studies may stem from their use of empirical research methods (e.g., the market model) with overly strong assumptions. The current study applies an alternative approach; it utilizes a research method which relies on two versions of the second degree stochastic dominance critedon: the standard second degree stochastic dominance and stochastic dominance with lending and borrowing. These cdteria examine changes in stockholders' welfare by considedng simultaneously dsk and possible outcomes in a more general manner. They do not require the assumptions of the market model, nor do they necessitate the estimation of specific dsk measures such as stock beta. The stochastic dominance approach is applied to a sample of firms that switched from FIFO to LIFO, and to a control group of firms that did not. The results do not support the hypothesis that stockholders' welfare is affected by corporate LIFO adoption. * Financial support from the Recanati Foundation is gratefully acknowledged. We thank Jeffrey Callen, Haim Falk, Yoram Kroll, Haim Levy, Joshua Livnat and three referees of this joumal for helpful suggestions. Any remaining errors are, of course, ours.

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Section: Stochastic Dominancementioning

confidence: 90%

Section: Stochastic Dominancementioning

confidence: 99%

mentioning

confidence: 99%

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Tests of the impact of LIFO adoption on stockholders: A stochastic dominance approach*

Aharony

Bar‐Yosef

1987

Contemporary Accting Res

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“…The absolute (or generalized) Lorenz curve representing denormalized values of the inverse cdf was introduced by Shorrocks (1983). The quantile representation of the SD was initially introduced by Levy and Kroll (1978). Ogryczak and Ruszczyński (2002b) formally showed the duality (conjugency) relation between the second order quantile function and the second order cdf, thus justifying the quantile SSD characteristic for arbitrary distributions.…”

Section: Notes and Referencesmentioning

confidence: 99%

Linear and Mixed Integer Programming for Portfolio Optimization

Mansini

Ogryczak

Speranza

2015

EURO Advanced Tutorials on Operational Research

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“…Levy and Kroll (1978) have extended the theory of stochastic dominance to incorporate a risk‐free asset (SD/ R ) in the analysis. They demonstrate the possible existence of a hybrid portfolio that combines risky portfolio, A , and a risk‐free asset to dominate risky portfolio, B , when portfolio A alone would not.…”

Section: Skewness Preference and Stochastic Dominancementioning

confidence: 99%

An Examination of the Small‐firm Effect on the Basis of Skewness Preference

Booth

Smith

1987

J of Financial Research

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This paper tests the hypothesis that the small‐firm effect can be explained on the basis of investor preference for positive skewness. Traditional stochastic dominance methodology is extended to consider portfolios including variable weights of investment in a riskless asset. Including a riskless asset provides the result that small‐firm portfolios stochastically dominate all other portfolios. This result, which is derived on the basis of 19 years of monthly returns, indicates that the small‐firm effect cannot be fully attributed to tax effects, benchmark error, or incorrect assumptions of the CAPM about investor risk aversion.

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Ordering Uncertain Options With Borrowing and Lending

Cited by 93 publications

References 30 publications

Tests of the impact of LIFO adoption on stockholders: A stochastic dominance approach*

Tests of the impact of LIFO adoption on stockholders: A stochastic dominance approach*

Linear and Mixed Integer Programming for Portfolio Optimization

An Examination of the Small‐firm Effect on the Basis of Skewness Preference

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