Theory Seminar - presented by Omer Tamuz (Caltech)
12 March 2019, 4:30 pm–6:00 pm
'Stochastic Dominance Under Independent Noise' with Philipp Strack and Luciano Pomatto
Event Information
Open to
- UCL staff | UCL students
Organiser
-
Department of Economics
Location
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Room 321Drayton House30 Gordon StreetLondonWC1H 0AXUnited 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