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Stochastic Dominance Analysis of iShares

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  • Dominic Gasbarro

    (Murdoch Business School Murdoch University)

  • Wing-Keung Wong

    ()
    (Risk Management Institute and Department of Economics, National University of Singapore)

  • J. Kenton Zumwalt

    (University of Western Australia Colorado State University)

Abstract

Country indices as represented by iShares exhibit non-normal return distributions with both skewness and kurtosis. Davidson and Duclos (2000) and Memmel (2003) provide procedures for determining the statistical significance of stochastic dominance measures and the Sharpe Ratio, respectively. This study uses these refinements to compare the performance of 18 country market indices. The iShares are indistinguishable when using the Sharpe Ratio as no significant differences are found. In contrast, stochastic dominance procedures identify dominant iShares. Although the results vary over time, stochastic dominance appears to be both more robust and discriminating than the CAPM in the ranking of the iShares.

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Bibliographic Info

Paper provided by National University of Singapore, Department of Economics, SCAPE in its series SCAPE Policy Research Working Paper Series with number 0706.

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Length: 37 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:sca:scaewp:0706

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Web page: http://www.fas.nus.edu.sg/ecs/scape/index.html
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Keywords: Stochastic dominance; Sharpe ratio; skewness; country index funds;

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