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Testing for Stochastic Dominance Efficiency

Topaloglou, Nikolas
Published in Journal of business & economic statistics. 2010, vol. 28, no. 1, p. 169-180
Abstract We consider consistent tests for stochastic dominance efficiency at any order of a given portfolio with respect to all possible portfolios constructed from a set of assets. We justify block bootstrap approaches to achieve valid inference in a time series setting. The test statistics are computed using linear and mixed integer programming formulations. Monte Carlo results show that the bootstrap procedure performs well in finite samples. The empirical application reveals that the Fama and French market portfolio is first and second order stochastic dominance efficient, although it is mean- variance inefficient.
Keywords NonparametricStochastic OrderingDominance Effi- ciencyLinear ProgrammingMixed Integer ProgrammingBlock Bootstrap
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Article (Accepted version) (242 Kb) - public document Free access
Research group Geneva Finance Research Institute (GFRI)
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SCAILLET, Olivier, TOPALOGLOU, Nikolas. Testing for Stochastic Dominance Efficiency. In: Journal of business & economic statistics, 2010, vol. 28, n° 1, p. 169-180. doi: 10.1198/jbes.2009.06167 https://archive-ouverte.unige.ch/unige:79877

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Deposited on : 2016-01-22

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