Consistent Testing for Stochastic Dominance: A Subsampling Approach

Oliver Linton, Esfandiar Maasoumi and Yoon-Jae Whang

No 1356, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We propose a procedure for estimating the critical values of the Klecan, McFadden, and McFadden (1990) test for first and second order stochastic dominance in the general k-prospect case. Our method is based on subsampling bootstrap. We show that the resulting test is consistent. We allow for correlation amongst the prospects and for the observations to be autocorrelated over time. Importantly, the prospects may be the residuals from certain conditional models.

Keywords: Bootstrap; Prospect theory; Stochastic dominance (search for similar items in EconPapers)
JEL-codes: C12 C14 C15 C52 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2002-02, Revised 2002-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published in Review of Economic Studies (2005), 72, 735-765, Corrigendum (2007), 75: 1-5

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Related works:
Working Paper: Consistent Testing for Stochastic Dominance: A Subsampling Approach (2004)
Working Paper: Consistent testing for stochastic dominance: a subsampling approach (2003)
Working Paper: Consistent testing for stochastic dominance: a subsampling approach (2002)
Working Paper: Consistent Testing for Stochastic Dominance: A Subsampling Approach (2002)
Working Paper: Consistent testing for stochastic dominance: a subsampling approach (2002)
Working Paper: Consistent testing for stochastic dominance: a subsampling approach (2002)
Working Paper: Consistent Testing for Stochastic Dominance: A Subsampling Approach (2002)
Working Paper: Consistent testing for stochastic dominance: a subsampling approach (2002)
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