Abstract: Stochastic dominance (SD) is a fundamental concept in decision theory. The term is used in decision theory and decision analysis to refer to situations where one gamble (a probability distribution over possible outcomes, also known as prospects) can be ranked as superior to another gamble. It is based on preferences regarding outcomes. It is associated with choice, on outcome of distribution and uncertainty in investment parlance. It is a form of stochastic ordering. A preference might be a simple ranking of outcomes from favorite to least favored, or it might also employ a value measure (i.e., a number associated with each outcome that allows comparison of multiples of one outcome with another, such as two instances of winning a dollar vs. one instance of winning two dollars.)
Keywords: Stochastic dominance (SD), investment, Decision theory.
Title: CONCEPT AND APPLICATION OF STOCHASTIC DOMINANCE IN INVESTMENTS
Author: Otieno Wesley Okoth
International Journal of Social Science and Humanities Research
ISSN 2348-3156 (Print), ISSN 2348-3164 (online)
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