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Theory Seminar - presented by Omer Tamuz (Caltech)

12 March 2019, 4:30 pm–6:00 pm

theory-seminar

'Stochastic Dominance Under Independent Noise' with Philipp Strack and Luciano Pomatto

Event Information

Open to

UCL staff | UCL students

Organiser

Department of Economics

Location

Room 321
Drayton House
30 Gordon Street
London
WC1H 0AX
United Kingdom

'Stochastic Dominance Under Independent Noise' with Philipp Strack and Luciano Pomatto

About the Speaker

Omer Tamuz

Assistant Professor of Economics at Caltech

Abstract:

Stochastic dominance is typically studied as a property of two gambles that are taken in isolation. In this paper, we study how additional independent sources of risk (e.g. uninsurable labor risk, house price risk, etc.) can affect the ordering of gambles. We show that, perhaps surprisingly, background risk can be strong enough to render lotteries that are ranked by their expectation ranked in terms of first-order stochastic dominance. We extend our results to second order stochastic dominance, and show how they lead to a novel, and elementary, axiomatization of mean-variance preferences. I will additionally discuss some related results, joint with Xiaosheng Mu, Philipp Strack and Luciano Pomatto.

More about Omer Tamuz