 Stochastic dominance via quantile regression with applications to investigate arbitrage opportunity and market efficiencyPin Ng, Wing-Keung Wong and Zhijie Xiao European Journal of Operational Research, 2017, vol. 261, issue 2, 666-678 Abstract: Tests for stochastic dominance constructed by translating the inference problem of stochastic dominance into parameter restrictions in quantile regressions are proposed. They are variants of the one-sided Kolmogorov–Smirnoff statistic with a limiting distribution of the standard Brownian bridge. The procedure to obtain the critical values of our proposed test statistics are provided. Simulation results show their superior size and power. They are applied to the NASDAQ 100 and S&P 500 indices to investigate dominance relationship before and after major turning points. Results show no arbitrage opportunity between the bear and bull markets. Our results infer that markets are inefficient and risk averters are better off investing in the bull rather than the bear market. Keywords: Quantile regression; Stochastic dominance; Brownian bridge; Internet bubble crisis; Subprime crisis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:261:y:2017:i:2:p:666-678 DOI: 10.1016/j.ejor.2017.02.047 Access Statistics for this article European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati More articles in European Journal of Operational Research from Elsevier |
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