Conditional stochastic dominance tests in dynamic settings
AbstractThis 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 into the test. 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 the investment efficiency between U S 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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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1205.
Date of creation: Feb 2012
Date of revision:
Hypothesis testing; Kernel estimation; Lower partial moments; Nonparametric regression; P-value transformation; Stochastic dominance;
Other versions of this item:
- Gonzalo, Jesús & Olmo, José, . "Conditional stochastic dominance tests in dynamic settings," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/9691, Universidad Carlos III de Madrid.
- Jesús Gonzalo & José Olmo, 2010. "Conditional stochastic dominance tests in dynamic settings," Economics Working Papers we1029, Universidad Carlos III, Departamento de Economía.
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
- G1 - Financial Economics - - General Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-14 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Open Access publications from Universidad Carlos III de Madrid
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