First-order stochastic dominance and risk-taking : some new results.

Summary Since Fishburn and Proter [1976], it has been known that a change in the return distribution of the risky asset that is dominated in the sense of first-order stochastic dominance does not necessarily generate a reduction in demand for that asset. To obtain unambiguous comparative statics results, one is forced to make additional restrictions on the change in risk. We show here that the so-called "monotone probability ratio" criterion satisfies this property. This criterion contains as a special case the better known "monotone likelihood ratio".