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Stochastic Dominance Analysis of iShares

Author

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  • Dominic Gasbarro

    (Murdoch University, NUS, Colorado State University)

  • Wing-Keung Wong
  • J. Kenton Zumwalt

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.

Suggested Citation

  • Dominic Gasbarro & Wing-Keung Wong & J. Kenton Zumwalt, 2007. "Stochastic Dominance Analysis of iShares," Finance Working Papers 21919, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:financ:21919
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    References listed on IDEAS

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    More about this item

    Keywords

    stochastic dominance; Sharpe ratio; skewness; country index funds;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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