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Conditional stochastic dominance tests in dynamic settings

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URI: https://hdl.handle.net/10016/35413
ISSN: 0020-6598
DOI: https://doi.org/10.1111/iere.12072
UXXI: AR/0000015520
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conditional_IER_2014_ps.pdf (375.75 KB)
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2014-08-01
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John Wiley & Sons, Inc.
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Abstract
This article 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 U. S. 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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Nonparametric-tests, Kernel estimation, Inference, Distributions, Models, Rates
Bibliographic citation
Gonzalo, J., & Olmo, J. (2014). Conditional stochastic dominance tests in dynamic settings. International Economic Review, 55, pp. 819–838
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