DEMAND FOR RISKY ASSETS AND THE MONOTONE PROBABILITY RATIO ORDER

Since Fishburn and Porter (1976), it has been known that a first-order dominant shift in the distribution of random returns of an asset does not necessarily induce a risk-averse decision maker to increase his h oldings of that improved asset. To obtain the desired comparative stat ics result, one has to further restrict the class of changes in the di stribution. In this article, we propose the ''monotone probability rat io'' criterion which is more general than the ''monotone likelihood ra tio'' criterion currently used in the literature.