Portfolio dominance, lower conditional expectation and the monotone likelihood ratio order.

Summary In the standard model of portfolio choice, a change in the distribution of the return on the risky asset is "portfolio-dominated" if it reduces the demand for the risky asset by all risk-averse investors, regardless of the risk-free asset rate. This paper presents the necessary and sufficient condition of portfolio-dominance. Portfolio-dominance is stronger than stochastic dominance of the second degree.