Consistent testing for stochastic dominance: a subsampling approach
We propose a procedure for estimating the critical values of the extended Kolmogorov- Smirnov tests of Stochastic Dominance of arbitrary order in the general K-prospect case. We allow for the observations to be serially dependent and, for the first time, we can accommodate general dependence amongst the prospects which are to be ranked. Also, the prospects may be the residuals from certain conditional models, opening the way for conditional ranking. We also propose a test of Prospect Stochastic Dominance. Our method is based on subsampling and we show that the resulting tests are consistent and powerful against some N −1/2 local alternatives. We also propose some heuristic methods for selecting subsample size and demonstrate in simulations that they perform reasonably. We describe an alternative method for obtaining critical values based on recentering the test statistic and using full sample bootstrap methods. We compare the two methods in theory and in practice.
|Date of creation:||Sep 2004|
|Contact details of provider:|| Postal: LSE Library Portugal Street London, WC2A 2HD, U.K.|
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Garry F. Barrett & Stephen G. Donald, 2003. "Consistent Tests for Stochastic Dominance," Econometrica, Econometric Society, vol. 71(1), pages 71-104, January.
- Y.K. Tse & Xibin Zhang, 2003. "A Monte Carlo Investigation of Some Tests for Stochastic Dominance," Monash Econometrics and Business Statistics Working Papers 7/03, Monash University, Department of Econometrics and Business Statistics.
- Michael Sattinger (ed.), 2001. "Income Distribution," Books, Edward Elgar Publishing, volume 0, number 2018, June.
- repec:cup:etheor:v:10:y:1994:i:5:p:849-66 is not listed on IDEAS
- Whang, Yoon-Jae, 2001. "Consistent specification testing for conditional moment restrictions," Economics Letters, Elsevier, vol. 71(3), pages 299-306, June.
- Gourieroux, Christian & Holly, Alberto & Monfort, Alain, 1982. "Likelihood Ratio Test, Wald Test, and Kuhn-Tucker Test in Linear Models with Inequality Constraints on the Regression Parameters," Econometrica, Econometric Society, vol. 50(1), pages 63-80, January.
- Abadie A., 2002. "Bootstrap Tests for Distributional Treatment Effects in Instrumental Variable Models," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 284-292, March.
- Porter, R. Burr & Wart, James R. & Ferguson, Donald L., 1973. "Efficient Algorithms for Conducting Stochastic Dominance Tests on Large Numbers of Portfolios," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 8(01), pages 71-81, January.
- Levy, Haim & Wiener, Zvi, 1998. "Stochastic Dominance and Prospect Dominance with Subjective Weighting Functions," Journal of Risk and Uncertainty, Springer, vol. 16(2), pages 147-63, May-June.
- Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
- Kaur, Amarjot & Prakasa Rao, B.L.S. & Singh, Harshinder, 1994. "Testing for Second-Order Stochastic Dominance of Two Distributions," Econometric Theory, Cambridge University Press, vol. 10(05), pages 849-866, December.
- 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.
- K. -Y. Ho, 2003. "Long-run stock price performance after IPOs: what do tests for stochastic dominance tell us?," Applied Economics Letters, Taylor & Francis Journals, vol. 10(1), pages 15-19.
- Hansen, B.E., 1991.
"Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis,"
RCER Working Papers
296, University of Rochester - Center for Economic Research (RCER).
- Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March.
- Anderson, Gordon, 1996. "Nonparametric Tests of Stochastic Dominance in Income Distributions," Econometrica, Econometric Society, vol. 64(5), pages 1183-93, September.
- Davidson, R. & Duclos, J.-Y., 1998.
"Statistical Inference for Stochastic Dominance and for the Measurement of Poverty and Inequality,"
98a14, Universite Aix-Marseille III.
- 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.
- Davidson, Russell & Duclos, Jean-Yves, 1998. "Statistical Inference for Stochastic Dominance and for the Measurement of Poverty and Inequality," Cahiers de recherche 9805, Université Laval - Département d'économique.
- Esfandiar Maasoumi & Almas Heshmati, 2000.
"Stochastic dominance amongst swedish income distributions,"
Taylor & Francis Journals, vol. 19(3), pages 287-320.
- Heshmati, Almas & Maasoumi, Esfandiar, 1998. "Stochastic Dominance Amongst Swedish Income Distributions," SSE/EFI Working Paper Series in Economics and Finance 279, Stockholm School of Economics.
- Anthony F. Shorrocks & James E. Foster, 1987. "Transfer Sensitive Inequality Measures," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 485-497.
- Hansen, Bruce E., 1996.
"Stochastic Equicontinuity for Unbounded Dependent Heterogeneous Arrays,"
Cambridge University Press, vol. 12(02), pages 347-359, June.
- Bruce E. Hansen, 1994. "Stochastic Equicontinuity for Unbounded Dependent Heterogeneous Arrays," Boston College Working Papers in Economics 295., Boston College Department of Economics.
- Delgado, Miguel A. & Rodriguez-Poo, Juan M. & Wolf, Michael, 2001.
"Subsampling inference in cube root asymptotics with an application to Manski's maximum score estimator,"
Elsevier, vol. 73(2), pages 241-250, November.
- Delgado, Miguel A. & Wolf, Michael & Rodríguez Poo, Juan M., 2000. "Subsampling inference in cube root asymptotics with an application to manski's maximum score estimator," DES - Working Papers. Statistics and Econometrics. WS 10110, Universidad Carlos III de Madrid. Departamento de Estadística.
- Davidson, R. & Duclos, J.Y., 1995.
"Statistical Inference for the Measurement of the Incidence of Taxes and Transfers,"
9521, Laval - Recherche en Politique Economique.
- Russell Davidson & Jean-Yves Duclos, 1997. "Statistical Inference for the Measurement of the Incidence of Taxes and Transfers," Econometrica, Econometric Society, vol. 65(6), pages 1453-1466, November.
- Davidson, R. & Duclos, J.Y., 1995. "Statistical Inference for the Measurement of the Incidence of Taxes and Transfers," G.R.E.Q.A.M. 95a30, Universite Aix-Marseille III.
- DAVIDSON, Russell & DUCLOS, Jean-Yves, 1995. "Statistical Inference for the Measurement of the Incidences of Taxes and Transfers," Cahiers de recherche 9521, Université Laval - Département d'économique.
- Xu, K. & Fisher, G. & Wilson, D., 1995. "New Distribution Tests for Stochastic Dominance," Department of Economics at Dalhousie University working papers archive 95-02, Dalhousie, Department of Economics.
- Donald W. K. Andrews, 1997.
"A Conditional Kolmogorov Test,"
Econometric Society, vol. 65(5), pages 1097-1128, September.
- Valentino Dardanoni & Antonio Forcina, 1999. "Inference for Lorenz curve orderings," Econometrics Journal, Royal Economic Society, vol. 2(1), pages 49-75.
- Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
- Bishop, John A & Formby, John P & Thistle, Paul D, 1992. "Convergence of the South and Non-South Income Distributions, 1969-1979," American Economic Review, American Economic Association, vol. 82(1), pages 262-72, March.
- Bawa, Vijay S., 1975. "Optimal rules for ordering uncertain prospects," Journal of Financial Economics, Elsevier, vol. 2(1), pages 95-121, March.
- Peter Reinhard Hansen, 2001. "An Unbiased and Powerful Test for Superior Predictive Ability," Working Papers 2001-06, Brown University, Department of Economics.
- repec:cup:etheor:v:12:y:1996:i:2:p:347-59 is not listed on IDEAS
- W. Ogryczak & A. Ruszczynski, 1997. "On Stochastic Dominance and Mean-Semideviation Models," Working Papers ir97043, International Institute for Applied Systems Analysis.
- Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
- Härdle, Wolfgang & Horowitz, Joel L. & Kreiss, Jens-Peter, 2001. "Bootstrap methods for time series," SFB 373 Discussion Papers 2001,59, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Ian Crawford, 1999. "Nonparametric tests of stochastic dominance in bivariate distributions, with an application to UK data," IFS Working Papers W99/28, Institute for Fiscal Studies.
- Daniel L. Millimet & Esfandiar Maasoumi, 2005. "Robust inference concerning recent trends in US environmental quality," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 55-77.
When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:24755. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (LSERO Manager)
If references are entirely missing, you can add them using this form.