Publication:
Empirical tests for stochastic dominance optimality

dc.contributor.coauthorN/A
dc.contributor.departmentGraduate School of Business
dc.contributor.kuauthorPost, Gerrit Tjeerd
dc.contributor.schoolcollegeinstituteGRADUATE SCHOOL OF BUSINESS
dc.date.accessioned2024-11-09T23:36:40Z
dc.date.issued2017
dc.description.abstractIf a given risky prospect is compared with multiple choice alternatives, then a joint test for optimality is more appropriate than a series of pairwise Stochastic Dominance tests. We develop and implement a bootstrap empirical likelihood ratio test for this hypothesis. The test statistic and implied probabilities can be computed by searching over discrete distributions that obey a system of linear inequalities using quasi-Monte Carlo simulation and convex optimization methods. An extension of the Kroll-Levy simulation experiment shows favorable small-sample properties for data sets of realistic dimensions. In an application to Fama-French stock portfolios, pairwise tests classify a portfolio of small growth stocks as admissible, whereas our test classifies the portfolio as significantly non-optimal for every risk averter.
dc.description.indexedbyWOS
dc.description.indexedbyScopus
dc.description.issue2
dc.description.openaccessYES
dc.description.publisherscopeInternational
dc.description.sponsoredbyTubitakEuN/A
dc.description.volume21
dc.identifier.doi10.1093/rof/rfw010
dc.identifier.eissn1573-692X
dc.identifier.issn1572-3097
dc.identifier.scopus2-s2.0-85018943666
dc.identifier.urihttps://doi.org/10.1093/rof/rfw010
dc.identifier.urihttps://hdl.handle.net/20.500.14288/12677
dc.identifier.wos401075800010
dc.keywordsEfficiency
dc.keywordsDistributions
dc.keywordsInference
dc.keywordsPortfolio
dc.keywordsSets
dc.language.isoeng
dc.publisherOxford Univ Press
dc.relation.ispartofReview of Finance
dc.subjectBusiness
dc.subjectFinance
dc.subjectEconomics
dc.titleEmpirical tests for stochastic dominance optimality
dc.typeJournal Article
dspace.entity.typePublication
local.contributor.kuauthorPost, Gerrit Tjeerd
local.publication.orgunit1GRADUATE SCHOOL OF BUSINESS
local.publication.orgunit2Graduate School of Business
relation.isOrgUnitOfPublication66c315a1-2b3d-40d3-89e4-aab9ae3b313b
relation.isOrgUnitOfPublication.latestForDiscovery66c315a1-2b3d-40d3-89e4-aab9ae3b313b
relation.isParentOrgUnitOfPublicationeae8aa5b-4ed7-47c1-a210-5860cba53ef4
relation.isParentOrgUnitOfPublication.latestForDiscoveryeae8aa5b-4ed7-47c1-a210-5860cba53ef4

Files