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Generalized Stochastic Dominance: An Empirical Examination

Published online by Cambridge University Press:  09 September 2016

Bruce A. McCarl
Bruce A. McCarl*
Affiliation:
Texas A&M University
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Abstract

Use of generalized stochastic dominance (GSD) requires one to place lower and upper bounds on the risk aversion coefficient. This study showed that breakeven risk aversion coefficients found assuming the exponential utility function delineate the places where GSD preferences switch between prospects. However, between these break points, multiple, overlapping GSD intervals can be found. Consequently, when one does not have risk aversion coefficient information, discovery of breakeven coefficients instead of GSD use is recommended. The investigation also showed GSD results are insensitive to wealth and data scaling but are sensitive to rounding.

Keywords

riskgeneralized stochastic dominancerisk aversion coefficients
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 22 , Issue 2 , December 1990 , pp. 49 - 55
Copyright
Copyright © Southern Agricultural Economics Association 1990

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