Conditional stochastic dominance tests in dynamic settings
Conditional stochastic dominance tests in dynamic settings
This paper proposes nonparametric consistent tests of conditional stochastic dominance of arbitrary order in a dynamic setting. The novelty of these tests lies in the nonparametric manner of incorporating the information set. The test allows for general forms of unknown serial and mutual dependence between random variables, and has an asymptotic distribution that can be easily approximated by simulation. This method has good finite-sample performance. These tests are applied to determine investment efficiency between US industry portfolios conditional on the dynamics of the market portfolio. The empirical analysis suggests that telecommunications dominates the other sectoral portfolios under risk aversion.
819-838
Gonzalo, J.
25fd9627-b2f7-41a2-b9f0-c9f8ebdfad16
Olmo, J.
706f68c8-f991-4959-8245-6657a591056e
August 2014
Gonzalo, J.
25fd9627-b2f7-41a2-b9f0-c9f8ebdfad16
Olmo, J.
706f68c8-f991-4959-8245-6657a591056e
Gonzalo, J. and Olmo, J.
(2014)
Conditional stochastic dominance tests in dynamic settings.
International Economic Review, 55 (3), .
(doi:10.1111/iere.12072).
Abstract
This paper proposes nonparametric consistent tests of conditional stochastic dominance of arbitrary order in a dynamic setting. The novelty of these tests lies in the nonparametric manner of incorporating the information set. The test allows for general forms of unknown serial and mutual dependence between random variables, and has an asymptotic distribution that can be easily approximated by simulation. This method has good finite-sample performance. These tests are applied to determine investment efficiency between US industry portfolios conditional on the dynamics of the market portfolio. The empirical analysis suggests that telecommunications dominates the other sectoral portfolios under risk aversion.
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e-pub ahead of print date: 28 July 2014
Published date: August 2014
Organisations:
Economics
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Local EPrints ID: 358592
URI: http://eprints.soton.ac.uk/id/eprint/358592
ISSN: 0020-6598
PURE UUID: bce488fa-a924-4fc3-840d-055618d9db65
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Date deposited: 11 Oct 2013 13:02
Last modified: 15 Mar 2024 03:46
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Author:
J. Gonzalo
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