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. 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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Bibliographic InfoPaper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 1311.
Date of creation: 01 Jan 2013
Date of revision:
Other versions of this item:
- Jesús Gonzalo & José Olmo, 2010. "Conditional stochastic dominance tests in dynamic settings," Economics Working Papers we1029, Universidad Carlos III, Departamento de Economía.
- Jose Olmo & Jesus Gonzalo, 2012. "Conditional stochastic dominance tests in dynamic settings," Economics Working Papers we1205, 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
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