Comparing risks with reference points: A stochastic dominance approach

doi:10.1016/j.insmatheco.2016.05.003

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	Comparing risks with reference points: A stochastic dominance approach
	Guo, Dongmei 1; Hu, Yi 2; Wang, Shouyang3 ; Zhao, Lin3
	2016-09-01
发表期刊	INSURANCE MATHEMATICS & ECONOMICS
ISSN	0167-6687
卷号	70 页码:105-116
摘要	This paper develops a stochastic dominance rule for the reference-dependent utility theory proposed by Koszegi and Rabin (2007). The new ordering captures the effects of loss aversion and can be used as a semi parametric approach in the comparison of risks with reference points. It is analytically amenable and possesses a variety of intuitively appealing properties, including the abilities to identify both "increase in risk" and "increase in downside risk", to resolve the Allais-type anomalies, to capture the violation of translational invariance and scaling invariance, and to accommodate the endowment effect for risk. The generalization to third-order dominance reveals that loss aversion can either reinforce or weaken prudence, depending on the location of the reference point. Potential applications of the new ordering in financial contexts are briefly discussed. (C) 2016 Published by Elsevier B.V.
关键词	Stochastic dominance Reference point Loss aversion Downside risk Allais-type anomalies Endowment effect for risk
DOI	10.1016/j.insmatheco.2016.05.003
语种	英语
资助项目	National Science Foundation of China (NSFC)[71301161] ; National Science Foundation of China (NSFC)[71532013] ; National Science Foundation of China (NSFC)[71301160] ; National Science Foundation of China (NSFC)[71301173] ; Program for Innovation Research in Central University of Finance and Economics
WOS研究方向	Business & Economics ; Mathematics ; Mathematical Methods In Social Sciences
WOS类目	Economics ; Mathematics, Interdisciplinary Applications ; Social Sciences, Mathematical Methods ; Statistics & Probability
WOS记录号	WOS:000383828200009
出版者	ELSEVIER SCIENCE BV
引用统计
文献类型	期刊论文
条目标识符	http://ir.amss.ac.cn/handle/2S8OKBNM/23431
专题	系统科学研究所
通讯作者	Zhao, Lin
作者单位	1.Cent Univ Finance & Econ, Sch Econ, Beijing 100081, Peoples R China 2.Univ Chinese Acad Sci, Sch Econ & Management, Beijing 100190, Peoples R China 3.Chinese Acad Sci, Acad Math & Syst Sci, Beijing 100190, Peoples R China
推荐引用方式 GB/T 7714	Guo, Dongmei,Hu, Yi,Wang, Shouyang,et al. Comparing risks with reference points: A stochastic dominance approach[J]. INSURANCE MATHEMATICS & ECONOMICS,2016,70:105-116.
APA	Guo, Dongmei,Hu, Yi,Wang, Shouyang,&Zhao, Lin.(2016).Comparing risks with reference points: A stochastic dominance approach.INSURANCE MATHEMATICS & ECONOMICS,70,105-116.
MLA	Guo, Dongmei,et al."Comparing risks with reference points: A stochastic dominance approach".INSURANCE MATHEMATICS & ECONOMICS 70(2016):105-116.