Do Recent Stochastic Tools Help To Better Understand Investors Preference And Asset Allocation?

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Maria-Lenuţa Ciupac-Ulici
Mircea-Cristian Gherman
Anissa Chaibi
Christophe Rault


Stochastic Dominance, Utility Function, Risk Aversion, Empirical Distributions


This paper contributes to the existing literature by investigating how recent developments in stochastic dominance can be implemented to better understand the statistical characteristic of distributions associated with traded financial assets. In particular, we assess the impact of a shock which occurs in the evolution of a time series on the investors preferences based on data from European developed and emerging stock markets. We show that stochastic dominance tools form a useful tool in risk aversion analysis and asset allocation.


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