Testing for Infinite Order Stochastic Dominance with Applications to Finance, Risk and Income Inequality

John Knight and S. Satchell

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: The authors develop a test of infinite degree stochastic dominance based on the use of the empirical moment generating function. Two applications are considered. One uses the income data of Anderson (Econometrica, 1996) and derives results consistent with his. In the other application, the dominance between the US and UK stockmarkets is examined. Using data on the S&P 500 and the FTALL-Share, it is shown that the US displays infinite degree stochastic dominance over the UK.

Keywords: Stochastic dominance; Inequality; Proper risk aversion (search for similar items in EconPapers)
JEL-codes: C12 C44 D61 (search for similar items in EconPapers)
Date: 1999-06
New Economics Papers: this item is included in nep-ecm
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Related works:
Journal Article: Testing for infinite order stochastic dominance with applications to finance, risk and income inequality (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:9911

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