In this paper we experimentally test skewness seeking at the individual level. Several prospects that can be ordered with respect to the third-degree stochastic dominance (3SD) criterion are ranked by the participants of the experiment. We ¯nd that the skewness of a distribution has a...

In this paper we experimentally test skewness preferences at the individual level. Several prospects that can be ordered with respect to the third-degree stochastic dominance (3SD) criterion are ranked by the participants of the experiment. We find that the skewness of a distribution has a...

While it is common knowledge that portfolio separation in a continuous-time lognormal market is due to the basic properties of the Gaussian distribution, the usual textbook exposition relies on dynamic programming and thus Itô stochastic calculus and the appropriate regularity conditions. This...

This study develops and implements a theory and method for analyzing whether introducing new securities or relaxing investment constraints improves the investment opportunity set for risk averse investors. We develop a test procedure for 'stochastic spanning' for two nested polyhedral portfolio...

We develop and implement a portfolio optimization method for building investment portfolios that dominate a given benchmark index in terms of third-degree stochastic dominance. Our approach relies on the properties of the semi-variance function, a refinement of an existing 'super-convex'...

The pseudo-isotropic multivariate distributions are shown to satisfy Ross' stochastic dominance criterion for two-fund monetary separation. The classical case of separation under abence of risk-free investment opportunity, admits a few particular generalizations to k-fund separation for...

The two fund separation property of the elliptical distributions is extended to the skew-elliptical and by adding a number of funds equalling the rank of the skewness matrix. Some elements of the generalization to singular extended skew-elliptical distributions are covered.

The paper compares portfolio optimization with the Second-Order Stochastic Dominance (SSD) constraints with mean-variance and minimum variance portfolio optimization. As a distribution-free decision rule, stochastic dominance takes into account the entire distribution of return rather than some...

Empirical research often requires a method how to convert a deterministic economic theory into an econometric model. A popular method is to add a random error term on the utility scale. This method, however, violates stochastic dominance. A modification of this method is proposed to avoid...

How does risk affect saving? Empirical work typically examines the effects of detectible differences in risk within the data. How these differences affect saving in theoretical models depends on the metric one uses for risk. For labor-income risk, second-degree increases in risk require prudence...