Decisions Tools In Signal Processing: A Stochastic Dominance Perspective
Journal Title: Acta Technica Napocensis- Electronica-Telecomunicatii (Electronics and Telecommunications) - Year 2012, Vol 53, Issue 4
Abstract
The aim of this paper is to provide an implementation of a stochastic dominance algorithm that establish which of the two distributions is preferred by individuals who have an aversive risk profile. Although, this topic related to decision making theory could be applied in almost every filed where one has to choose between empirical distributions, this study is performed on financial markets across Europe. The focus is to emphasis the impact of an important event (or shock) which occurs in the evolution of a time series. In the case of financial market such an event has been considered the latest financial crisis. The relevance of the study consist in that, it offers a different perspective for investors when choosing between the different financial assets. Our approach indicates that using a generalized stochastic dominance concept, the effects of an important event such the financial crisis is caught also in the attitude of individuals in regards to risk. This approach together with the Meyer algorithm for generalized stochastic dominance is a useful tool in risk aversion analysis when choosing among distributions. Its applicability could be also extended to other fields where a distinction between empirical distributions of time series (signals) is necessary.
Authors and Affiliations
Mircea-Cristian GHERMAN, Cyrille PIATECKI, Monica BORDA
Keywords
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