A Monte Carlo Investigation of Some Tests for Stochastic Dominance
AbstractThis paper compares the performance of several tests for stochastic dominance up to order three using Monte Carlo methods. The tests considered are the Davidson and Duclos (2000) test, the Anderson test (1996) and the Kaur, Rao and Singh (1994) test. Only unpaired samples of independent observations are considered, as this is a restriction for both the Anderson and Kaur-Rao-Singh tests. We find that the Davidson-Duclos test appears to be the best. The Kaur-Rao-Singh test is overly conservative and does not compare favorably against the Davidson-Duclos and Anderson tests in terms of power.
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Bibliographic InfoPaper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 7/03.
Length: 29 pages
Date of creation: Mar 2003
Date of revision:
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Postal: PO Box 11E, Monash University, Victoria 3800, Australia
Web page: http://www.buseco.monash.edu.au/depts/ebs/
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Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-04-21 (All new papers)
- NEP-CMP-2003-04-21 (Computational Economics)
- NEP-ECM-2003-04-24 (Econometrics)
- NEP-RMG-2003-04-21 (Risk Management)
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