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A Stochastic Dominance Approach to Spanning. With an Application to the January Effect/Una aproximación mediante la metodología del dominio estocástico al fenómeno del SPANNING. Una aplicación al efecto enero

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  • POST, THIERRY

    () (Erasmus University Rotterdam .P.O. Box 1738, 3000 DR Rotterdam, The Netherlands.)

Abstract

We develop a Stochastic Dominance methodology to analyze whether rational non-satiable and risk?averse investors benefit from a particular expansion of the investment possibilities. This methodology avoids the simplifying assumptions underlying the traditional mean?variance approach to spanning. The methodology is applied to analyze the stock market behavior of small firms in the month of January. Our findings suggest that the previously observed January effect is remarkably robust with respect to simplifying assumptions regarding the return distribution. En este trabajo se desarolla una metodología tipo Dominio Estocástico para analizar si un inversor racional, insaciable y adverso al riesgo se beneficia de una particular expansión de sus posibilidades de inversión. Mediante el Dominio Estocástico se elimina la asunción simplificadora subyacente a la aproximación tradicional Media Varianza a este fenómeno. En este trabajo se extiende también la aplicación de esta metodología al análisis del comportamiento del mercado de pequeñas firmas en el mes de enero. Los resultados obtenidos sugieren que la explicación de este fenómeno, el Efecto Enero, no es congruente con la asunción simplificadora sobre el comportamiento de los rendimientos.

Suggested Citation

  • Post, Thierry, 2005. "A Stochastic Dominance Approach to Spanning. With an Application to the January Effect/Una aproximación mediante la metodología del dominio estocástico al fenómeno del SPANNING. Una aplicación al efec," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 23, pages 7-25, Abril.
  • Handle: RePEc:lrk:eeaart:23_1_1
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    References listed on IDEAS

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    1. Reinganum, Marc R., 1983. "The anomalous stock market behavior of small firms in January : Empirical tests for tax-loss selling effects," Journal of Financial Economics, Elsevier, vol. 12(1), pages 89-104, June.
    2. Larsen, Glen A, Jr & Resnick, Bruce G, 1996. "Refining the Bootstrap Method of Stochastic Dominance Analysis: The Case of the January Effect," Review of Quantitative Finance and Accounting, Springer, vol. 7(1), pages 65-79, July.
    3. Huberman, Gur & Kandel, Shmuel, 1987. " Mean-Variance Spanning," Journal of Finance, American Finance Association, vol. 42(4), pages 873-888, September.
    4. G. Hanoch & H. Levy, 1969. "The Efficiency Analysis of Choices Involving Risk," Review of Economic Studies, Oxford University Press, vol. 36(3), pages 335-346.
    5. Russell Davidson & Jean-Yves Duclos, 2000. "Statistical Inference for Stochastic Dominance and for the Measurement of Poverty and Inequality," Econometrica, Econometric Society, vol. 68(6), pages 1435-1464, November.
    6. Keim, Donald B., 1983. "Size-related anomalies and stock return seasonality : Further empirical evidence," Journal of Financial Economics, Elsevier, vol. 12(1), pages 13-32, June.
    7. Kroll, Yoram & Levy, Haim, 1980. "Sampling Errors and Portfolio Efficient Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(03), pages 655-688, September.
    8. Dybvig, Philip H & Ross, Stephen A, 1982. "Portfolio Efficient Sets," Econometrica, Econometric Society, vol. 50(6), pages 1525-1546, November.
    9. Campbell R. Harvey & Akhtar Siddique, 2000. "Conditional Skewness in Asset Pricing Tests," Journal of Finance, American Finance Association, vol. 55(3), pages 1263-1295, June.
    10. Kraus, Alan & Litzenberger, Robert H, 1976. "Skewness Preference and the Valuation of Risk Assets," Journal of Finance, American Finance Association, vol. 31(4), pages 1085-1100, September.
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    More about this item

    Keywords

    Spanning; Dominio Estocástico; Efecto Enero; Asimetría;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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