Testing for Stochastic Dominance Efficiency

Olivier Scaillet and Nikolas Topaloglou

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: We consider consistent tests for stochastic dominance efficiency at any order of a given portfolio with respect to all possible portfolios constructed from a set of assets. We propose and justify approaches based on simulation and the block bootstrap to achieve valid inference in a time series setting. The test statistics and the estimators are computed using linear and mixed integer programming methods. The empirical application shows that the Fama and French market portfolio is FSD and SSD efficient, although it is mean-variance inefficient.

Keywords: Nonparametric, Stochastic Ordering; Dominance Efficiency; Linear Programming; Mixed Integer Programming; Simulation; Bootstrap (search for similar items in EconPapers)
JEL-codes: C12 C13 C15 C44 D81 G11 (search for similar items in EconPapers)
Date: 2005-07
New Economics Papers: this item is included in nep-ecm and nep-fin
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Testing for Stochastic Dominance Efficiency (2010)
Working Paper: Testing foe Stochastic Dominance Efficiency (2006)
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