Distorted stochastic dominance: a generalized family of stochastic orders
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Publication:2201711
Abstract: We study a generalized family of stochastic orders, semiparametrized by a distortion function H, namely H-distorted stochastic dominance, which may determine a continuum of dominance relations from the first- to the second-order stochastic dominance (and beyond). Such a family is especially suitable for representing a decision maker's preferences in terms of risk aversion and may be used in those situations in which a strong order does not have enough discriminative power, whilst a weaker one is poorly representative of some classes of decision makers. In particular, we focus on the class of power distortion functions, yielding power-distorted stochastic dominance, which seems to be particularly appealing owing to its computational simplicity and some interesting statistical interpretations. Finally, we characterize distorted stochastic dominance in terms of distortion functions yielding isotonic classes of distorted expectations.
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Cited in
(6)- Stochastic dominance relations for generalised parametric distributions obtained through composition
- On a stochastic order induced by an extension of Panjer's family of discrete distributions
- Comparison of higher degree stop-loss transforms
- Second-order stochastic comparisons of order statistics
- Transform orders and stochastic monotonicity of statistical functionals
- Note on lexicographic-order preservation and stochastic dominance
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