Testing for Stochastic Dominance Efficiency

Linton, Oliver B.; Post, Thierry; Whang, Yoon-Jae

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Testing for Stochastic Dominance Efficiency

ERIM Report Series Reference No. ERS-2005-033-F&A

29 Pages Posted: 13 May 2005

See all articles by Oliver B. Linton

Thierry Post

Graduate School of Business of Nazarbayev University

Yoon-Jae Whang

Seoul National University - School of Economics

Date Written: 28 2005 6,

Abstract

We propose a new test of the stochastic dominance efficiency of a given portfolio over a classof portfolios. We establish its null and alternative asymptotic properties, and define a methodfor consistently estimating critical values. We present some numerical evidence that our testswork well in moderate sized samples.

Keywords: stochastic dominance, portfolio diversification, asset pricing, portfolio analysis

JEL Classification: M, G3, G12, C19

Suggested Citation: Suggested Citation

Linton, Oliver B. and Post, Thierry and Whang, Yoon-Jae, Testing for Stochastic Dominance Efficiency (28 2005 6,). ERIM Report Series Reference No. ERS-2005-033-F&A, Available at SSRN: https://ssrn.com/abstract=722504