The sizes and powers of some stochastic dominance tests: A Monte Carlo study for correlated and heteroskedastic distributions

Mathematics and Computers in Simulation

Volumn 79, Issue 1, 2008, Pages 30-48

  Lean, Hooi Hooi ^a   Wong, Wing Keung ^b,c   Zhang, Xibin ^d  

^a SCHOOL OF PHYSICS   (Malaysia)

^b HONG KONG BAPTIST UNIVERSITY   (Hong Kong)

^c NATIONAL UNIVERSITY OF SINGAPORE   (Singapore)

^d MONASH UNIVERSITY   (Australia)

Author keywords

Correlated distributions; Grid points; Heteroskedasticity; Stochastic dominance

Indexed keywords

ASSET MANAGEMENT; IMAGE SEGMENTATION; MONTE CARLO METHODS; SEMICONDUCTOR QUANTUM DOTS; STATISTICAL METHODS; STATISTICAL TESTS; STOCHASTIC PROGRAMMING; TESTING;

ANDERSON; CORRELATED DISTRIBUTIONS; DAVIDSON; GRID POINTS; HETEROSKEDASTICITY; INCOME INEQUALITY; MARKET EFFICIENCY; MONTE CARLO STUDY; MONTE-CARLO SIMULATIONS; NONPARAMETRIC TESTING; SECOND ORDERS; STATISTICAL INFERENCES; STOCHASTIC DOMINANCE;

ELECTRONIC EQUIPMENT TESTING;

EID: 48549107525     PISSN: 03784754     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.matcom.2007.09.002     Document Type: Article

References (42)

1. Anderson G. Nonparametric tests of stochastic dominance in income distributions. Econometrica 64 (1996) 1183-1193
2. Anderson G. Making inferences about the polarization, welfare and poverty of nations: a study of 101 countries 1970-1995. J. Appl. Econ. 19 5 (2004) 537-550
3. Barrett G.F., and Donald S.G. Consistent test for stochastic dominance. Econometrica 71 1 (2003) 71-104
4. Bishop J.A., Formby J.P., and Thistle P.D. Convergence of the South and non-South income distributions. Am. Econ. Rev. 82 1 (1992) 262-272
5. K.V. Chow, Statistical Inference for Stochastic Dominance: A Distribution Free Approach, Ph.D. Thesis, University of Alabama, 1989.
6. Chow K.V. Marginal conditional stochastic dominance, statistical inference, and measuring portfolio performance. J. Financ. Res. 24 2 (2001) 289-307
7. Dardanoni V., and Forcina A. A unified approach to likelihood inference on stochastic orderings in a nonparametric context. J. Am. Stat. Assoc. 93 (1998) 1112-1123
8. Dardanoni V., and Forcina A. Inference for Lorenz curve orderings. Econ. J. 2 (1999) 49-75
9. Davidson R., and Duclos J.Y. Statistical inference for stochastic dominance and for the measurement of poverty and inequality. Econometrica 68 6 (2000) 1435-1464
10. Davidson R., and Duclos J.-Y. Testing for Restricted Stochastic Dominance (2006), McGill University, Mimeo
11. Fong W.M., Wong W.K., and Lean H.H. International momentum strategies: a stochastic dominance approach. J. Financ. Markets 8 (2005) 89-109
12. Gasbarro D., Wong W.K., and Zumwalt J.K. Stochastic dominance analysis of iShares. Eur. J. Finance 13 (2007) 89-101
13. Hadar J., and Russell W.R. Stochastic dominance and diversification. J. Econ. Theory 3 (1971) 288-305
14. Hochberg Y. Some generalizations of the T-method in simultaneous inference. J. Multivar. Anal. 4 (1974) 224-234
15. Jegadeesh N., and Titman S. Returns to buying winners and selling losers: implications for stock market efficiency. J. Finance 48 (1993) 65-91
16. Jegadeesh N., and Titman S. Profitability of momentum strategies: an evaluation of alternative explanations. J. Finance 56 (2001) 699-720
17. Joy O.M., and Porter R.B. Stochastic dominance and mutual fund performance. J. Financ. Quant. Anal. 9 (1974) 24-31
18. Kaur A., Rao B.L.S.P., and Singh H. Testing for second order stochastic dominance of two distributions. Econ. Theory 10 (1994) 849-866
19. L. Klecan, R. McFadden, D. McFadden, A robust test for stochastic dominance, Working Paper, MIT & Cornerstone Research, 1991.
20. Lean H.H., Smyth R., and Wong W.K. Revisiting calendar anomalies in Asian stock markets using a stochastic dominance approach. J. Multinatl. Financ. Manage. 17 2 (2007) 125-141
21. Levy H., and Sarnat M. Alternative efficiency criteria: an empirical analysis. J. Finance 25 (1970) 1153-1158
22. Levy H., and Sarnat M. Investment performance in an imperfect securities market. Financ. Anal. J. 28 (1972) 78-81
23. Li C.K., and Wong W.K. Extension of stochastic dominance theory to random variables. RAIRO Rech. Opér. 33 4 (1999) 509-524
24. Linton O., Maasoumi E., and Whang Y.J. Consistent testing for stochastic dominance under general sampling schemes. Rev. Econ. Stud. 72 (2005) 735-765
25. McFadden D. Testing for stochastic dominance. In: Fomby T.B., and Seo T.K. (Eds). Studies in the Economics of Uncertainty (1989), Springer-Verlag, New York 113-132
26. Richmond J. A general method for constructing simultaneous confidence intervals. J. Am. Stat. Assoc. 77 (1982) 455-460
27. Seyhun H.N. Can omitted risk factors explain the January effects? A stochastic dominance approach. J. Financ. Quant. Anal. 28 2 (1993) 195-212
28. Sharpe W. Capital asset prices: a theory of market equilibrium under conditions of risk. J. Finance 19 (1964) 425-442
29. S.-H. Shin, Essays on Asset Return Predictability (stock market, foreign exchange rates), Unpublished Ph.D. Thesis, Massachusetts Institute of Technology, 1994.
30. Sidak Z. Rectangular confidence regions for the means of multivariate normal distributions. J. Am. Stat. Assoc. 62 (1967) 626-633
31. Stoline M.R., and Ury H.K. Tables of the studentized maximum modulus distribution and an application to multiple comparisons among means. Technometrics 21 (1979) 87-93
32. Tesfatsion L. Stochastic dominance and maximization of expected utility. Rev. Econ. Stud. 43 (1976) 301-315
33. Tse Y.K., and Zhang X. A Monte Carlo investigation of some tests for stochastic dominance. J. Stat. Comput. Simulat. 74 (2004) 361-378
34. Varian H. Nonparametric tests of models of investor behavior. J. Financ. Quant. Anal. 18 (1983) 269-278
35. Wingender J., and Groff J.E. On stochastic dominance analysis of day-of-the-week return patterns. J. Financ. Res. 12 1 (1989) 51-55
36. Wong W.K. Stochastic dominance and mean-variance measures of profit and loss for business planning and investment. Eur. J. Operat. Res. 182 (2007) 829-843
37. W.K. Wong, R. Chan, Markowitz and prospect stochastic dominances, Ann. Finance, in press.
38. Wong W.K., and Li C.K. A note on convex stochastic dominance theory. Econ. Lett. 62 (1999) 293-300
39. W.K. Wong, C. Ma, Preferences over location-scale family, Econ. Theory, in press.
40. W.K. Wong, K.F. Phoon, H.H. Lean, Stochastic dominance analysis of Asian hedge funds, Pacific-Basin Finance J., in press.
41. Zheng B., and Cushing B.J. Statistical inference for testing inequality indices with dependent samples. J. Econ. 101 (2001) 315-335
42. Zheng B., Formby J.P., Smith W.J., and Chow V.K. Inequality orderings, normalized stochastic dominance, and statistical inference. J. Bus. Econ. Stat. 18 4 (2000) 479-488