A Performance Index Consistent with Fractional-Order Stochastic Dominance

The literature has pointed out that many decision makers could exhibit some degree of risk lovingness. Yet, it still lacks a suitable performance index which is consistent with the preferences of all of them, i.e., the preferred project has a higher score. To fulfill this need, our paper proposes a new performance index which is consistent with fractional-order stochastic dominance and is referred to as fractional-order Omega. Furthermore, we demonstrate how to construct fractional-order Omega using forward-looking information from option prices and empirically apply it in finding a market timing strategy