What Does Stochastic Dominance Mean?

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What does Stochastic Dominance mean? Read on to discover the definition & meaning of the term Stochastic Dominance - to help you better understand the language used in insurance policies.

Stochastic Dominance

Stochastic Dominance

Refers to the use of historical empirical data to support future projections in terms of probability. Stochastic dominance refers to one data set's dominance over another relative to the value of the outcomes. For example, when comparing the relative value of two investments (asset A and asset B) the one whose probable rate of return exceeds the other, at any level, is stochastically dominant.

We hope the you have a better understanding of the meaning of Stochastic Dominance.

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