Robust Inference for Inverse Stochastic Dominance
Francesco Andreoli ()
Journal of Business & Economic Statistics, 2018, vol. 36, issue 1, 146-159
The notion of inverse stochastic dominance is gaining increasing support in risk, inequality, and welfare analysis as a relevant criterion for ranking distributions, which is alternative to the standard stochastic dominance approach. Its implementation rests on comparisons of two distributionsâ€™ quantile functions, or of their multiple partial integrals, at fixed population proportions. This article develops a novel statistical inference model for inverse stochastic dominance that is based on the influence function approach. The proposed method allows model-free evaluations that are limitedly affected by contamination in the data. Asymptotic normality of the estimators allows to derive tests for the restrictions implied by various forms of inverse stochastic dominance. Monte Carlo experiments and an application promote the qualities of the influence function estimator when compared with alternative dominance criteria.
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Persistent link: https://EconPapers.repec.org/RePEc:taf:jnlbes:v:36:y:2018:i:1:p:146-159
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