Conditional stochastic dominance tests in dynamic settings

Jose Olmo
Authors registered in the RePEc Author Service: Jesus Gonzalo

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: This paper proposes nonparametric consistent tests of conditional stochastic dominance of arbitrary order in a dynamic setting. The novelty of these tests resides on the nonparametric manner of incorporating the information set into the test. The test allows for general forms of unknown serial and mutual dependence between random variables, and has an asymptotic distribution under the null hypothesis that can be easily approximated by a p-value transformation method. This method has a good finite-sample performance. These tests are applied to determine investment efficiency between US industry portfolios conditional on the performance of the market portfolio. Our analysis suggests that Utilities are the best performing sectors in normal as well as distress episodes of the market.

Keywords: Empirical; processes; Hypothesis; testing; Lower; partial; moments; Martingale; difference; sequence; P-value; transformation; Stochastic; dominance (search for similar items in EconPapers)
JEL-codes: C1 C2 G1 (search for similar items in EconPapers)
Date: 2010-10
New Economics Papers: this item is included in nep-ecm
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: CONDITIONAL STOCHASTIC DOMINANCE TESTS IN DYNAMIC SETTINGS (2014)
Working Paper: Conditional stochastic dominance tests in dynamic settings (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we1029

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