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Testing for Restricted Stochastic Dominance

Russell Davidson and Jean-Yves Duclos

No 2047, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Asymptotic and bootstrap tests are studied for testing whether there is a relation of stochastic dominance between two distributions. These tests have a null hypothesis of nondominance, with the advantage that, if this null is rejected, then all that is left is dominance. This also leads us to define and focus on restricted stochastic dominance, the only empirically useful form of dominance relation that we can seek to infer in many settings. One testing procedure that we consider is based on an empirical likelihood ratio. The computations necessary for obtaining a test statistic also provide estimates of the distributions under study that satisfy the null hypothesis, on the frontier between dominance and nondominance. These estimates can be used to perform bootstrap tests that can turn out to provide much improved reliability of inference compared with the asymptotic tests so far proposed in the literature.

Keywords: bootstrap test; empirical likelihood; stochastic dominance (search for similar items in EconPapers)
JEL-codes: C10 C12 C15 I32 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2006-03
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

Published - published in: Econometric Review , 2012, 32 (1), 84 - 125

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Related works:
Journal Article: Testing for Restricted Stochastic Dominance (2013) Downloads
Working Paper: Testing for Restricted Stochastic Dominance (2013)
Working Paper: Testing for restricted stochastic dominance (2009) Downloads
Working Paper: Testing for Restricted Stochastic Dominance (2006) Downloads
Working Paper: Testing for Restricted Stochastic Dominance (2006) Downloads
Working Paper: Testing for Restricted Stochastic Dominance (2006) Downloads
Working Paper: TESTING FOR RESTRICTED STOCHASTIC DOMINANCE (2006) Downloads
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