Title

Kappa ratios and (higher-order) stochastic dominance

Document Type

Journal article

Source Publication

Risk Management

Publication Date

8-1-2017

Volume

19

Issue

3

First Page

245

Last Page

253

Publisher

Palgrave Macmillan Ltd.

Keywords

Kappa ratio, Mean-risk analysis, Omega ratio, Risk aversion, Sortino ratio, Stochastic dominance

Abstract

This paper first shows the sufficient relationship between the $$(n+1)$$ (n + 1) -order SD and the n-order Kappa ratio. In fact, we clarify the restrictions on necessary beating of the target for the higher-order SD consistency of the Kappa ratios. Thereafter, we show that, in general, the necessary relationship between SD/RSD and the Kappa ratio cannot be established. We find that when the variables being compared belong to the same location-scale family or the same linear combination of location-scale families, we can get the necessary relationship between the (n+1)$$ (n + 1) -order SD with the n-order Kappa ratio after imposing some conditions on the means. Our findings enable academics and practitioners to draw better decision in their analysis.

DOI

10.1057/s41283-017-0020-1

Print ISSN

14603799

E-ISSN

17434637

Funding Information

This research has been partially supported by grants from the Fundamental Research Funds for the Central Universities, China Postdoctoral Science Foundation (2016M600951), Humanities and Social Sciences Planning Fund of Ministry of Education (15YJA910004), Natural Science Foundation of Zhejiang Province (LY15A010006), Asia University, Hang Seng Management College, Lingnan University, the Research Grants Council of Hong Kong, Ministry of Science and Technology (MOST), Taiwan, and World Track Investment Ltd. {2016M600951, 15YJA910004, LY15A010006}

Publisher Statement

Copyright © 2017 Macmillan Publishers Ltd. Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Language

English

Recommended Citation

Niu, C., Wong, W.-K., & Xu, Q. (2017). Kappa ratios and (higher-order) stochastic dominance. Risk Management, 19(3), 245-253. doi: 10.1057/s41283-017-0020-1

Share

COinS