Almost expectation and excess dependence notions

作者：Denuit Michel M^*; Huang Rachel J; Tzeng Larry Y

来源：Theory and Decision, 2015, 79(3): 375-401.

DOI：10.1007/s11238-014-9476-6

• Almost stochastic dominance
• Portfolio theory
• Diversification
• Optimal investment
• Background risk

This paper weakens the expectation dependence concept due to Wright (Theory Decis 22:111-124, 1987) and its higher-order extensions proposed by Li (J Econ Theory 146:372-391, 2011) to conform with the preferences generating the almost stochastic dominance rules introduced in Leshno and Levy (Manag Sci 48:1074-1085, 2002). A new dependence concept, called excess dependence is introduced and studied in addition to expectation dependence. This new concept coincides with expectation dependence at first-degree but provides distinct higher-order extensions. Three applications, to portfolio diversification, to the determination of the sign of the equity premium in the consumption-based CAPM, and to optimal investment in the presence of a background risk, illustrate the usefulness of the approach proposed in the present paper.

• 出版日期2015-11
• 单位中央民族大学