Download or read book Empirical Tests for Stochastic Dominance Efficiency written by Thierry Post and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive empirical tests for the stochastic dominance efficiency of a given portfolio with respect to all possible portfolios constructed from a set of assets. The tests can be computed using straightforward linear programming. Bootstrapping techniques and asymptotic distribution theory can approximate the sampling properties of the test results and allow for statistical inference. Our results could provide a stimulus to the further proliferation of stochastic dominance for the problem of portfolio selection and evaluation. Using our tests, the Fama and French market portfolio is significantly inefficient relative to benchmark portfolios formed on market capitalization and book-to-market equity ratio.

Download or read book Multivariate Tests for Stochastic Dominance Efficiency of a Given Portfolio written by Thierry Post and published by . This book was released on 2005 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop empirical tests for stochastic dominance efficiency of a given investment portfolio relative to all possible portfolios formed from a set of assets. Our tests use multivariate statistical methods, which results in good statistical power properties and increases the comparability with existing mean-variance tests. Using our tests, we demonstrate that the mean-variance inefficiency of the CRSP all-share index relative to beta-sorted portfolios can be explained by tail risk not captured by variance.

Download or read book Testing for Stochastic Dominance Efficiency written by Olivier Scaillet and published by . This book was released on 2005 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Tests of Stochastic Dominance for Time Series Data written by Hendrik Kläver and published by . This book was released on 2006 with total page 183 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Empirical Tests for Stochastic Dominance Optimality written by Thierry Post and published by . This book was released on 2018 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: If a given risky prospect is compared with multiple choice alternatives, then a joint test for optimality is more appropriate than a series of pairwise Stochastic Dominance tests. We develop and implement a bootstrap empirical likelihood ratio test for this hypothesis. The test statistic and implied probabilities can be computed by searching over discrete distributions that obey a system of linear inequalities using quasi-Monte Carlo simulation and convex optimization methods. An extension of the Kroll-Levy simulation experiment shows favorable small-sample properties for data sets of realistic dimensions. In an application to Fama-French stock portfolios, pairwise tests classify a portfolio of small growth stocks as admissible, whereas our test classifies the portfolio as significantly non-optimal for every risk averter.

Download or read book Extensions on Stochastic Dominance Efficiency Tests written by Markku Kallio and published by . This book was released on 2018 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider second, third, fourth and fifth order stochastic dominance (SSD, TSD, FOSD and FISD, respectively) as well as decreasing absolute risk aversion (DARA) stochastic dominance (DSD). For comparison with DSD we also consider stochastic dominance (ESD) based on CARA utility functions. Their relevance in practice arises from empirical evidence on individual preferences fitting to preference models underlying such stochastic dominance relations. Assuming a known, discrete and finite probability distribution we derive necessary and sufficient efficiency tests under the six types of stochastic dominance. Simple arguments yield well-known SSD and TSD efficiency tests which are subsequently used to develop new FOSD, FISD, DSD and ESD efficiency tests. We provide numerical demonstration using stock market data of the US.

Download or read book A GMM Test for SSD Efficiency written by Thierry Post and published by . This book was released on 2011 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop an empirical test for Second-order Stochastic Dominance (SSD) efficiency of a given investment portfolio relative to all possible portfolios formed from a set of assets. Contrary to the Linear Programming test of Post, Thierry, 2003, Empirical tests for stochastic dominance efficiency, Journal of Finance 58, 1905mdash;1932, our test is embedded in the Generalized Method of Moments (GMM) framework. The GMM test has superior statistical properties compared to the original LP test. Using this test, we demonstrate that the anomalous size effect can be explained with risk not captured by variance alone. However, the market portfolio remains SSD inefficient relative to value and momentum portfolios due to the overvaluation of growth stocks and past losers.

Download or read book Testing for Stochastic Dominance with Diversification Possibilities written by Thierry Post and published by . This book was released on 2012 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive empirical tests for stochastic dominance that allow for diversification between choice alternatives. The tests can be computed using straightforward linear programming. Bootstrapping techniques and asymptotic distribution theory can approximate the sampling properties of the test results and allow for statistical inference. Our results could provide a stimulus to the further proliferation of stochastic dominance for the problem of portfolio selection and evaluation (as well as other choice problems under uncertainty that involve diversification possibilities). An empirical application for US stock market data illustrates our approach.

Download or read book Advances in the use of stochastic dominance in asset pricing written by Philippe Johannes Petrus Marie Versijp and published by Rozenberg Publishers. This book was released on 2007 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Stochastic Dominance Efficiency Tests Under Diversification written by Timo Kuosmanen and published by . This book was released on 2001 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Testing for Stochastic Dominance Efficiency written by Oliver B. Linton and published by . This book was released on 2012 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a new test of the stochastic dominance efficiency of a given portfolio over a classof portfolios. We establish its null and alternative asymptotic properties, and define a methodfor consistently estimating critical values. We present some numerical evidence that our testswork well in moderate sized samples.

Download or read book Testing for Stochastic Dominance Efficiency written by Olivier Scaillet and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Testing for Stochastic Dominance Efficiency written by and published by . This book was released on 2005 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Studies in the Economics of Uncertainty written by Thomas B. Fomby and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 233 pages. Available in PDF, EPUB and Kindle. Book excerpt: Studies in the Economics of Uncertainty presents some new developments in the economics of uncertainty produced by leading scholars in the field. The contributions to this Festschrift in honor of Professor Josef Hadar of Southern Methodist University cover a broad range of topics centered on the principle of Stochastic Dominance. Topics covered range from theoretical and statistical developments on Stochastic Dominance to new applications of the Stochastic Dominance Theory. The intended audience includes researchers interested in recent developments in tools used for decision-making under uncertainty as well as economists currently applying Stochastic Dominance principles to the analysis of the Theory of Firm, International Trade, and the Theory of Finance.

Download or read book Testing for Third Order Stochastic Dominance with Diversification Possibilities written by Thierry Post and published by . This book was released on 2009 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive an empirical test for third-order stochastic dominance that allows fordiversification between choice alternatives. The test can be computed usingstraightforward linear programming. Bootstrapping techniques and asymptoticdistribution theory can approximate the sampling properties of the test results and allowfor statistical inference. Our approach is illustrated using real-life US stock market data.

Download or read book Stochastic Dominance written by Haim Levy and published by Springer. This book was released on 2015-10-31 with total page 517 pages. Available in PDF, EPUB and Kindle. Book excerpt: This fully updated third edition is devoted to the analysis of various Stochastic Dominance (SD) decision rules. It discusses the pros and cons of each of the alternate SD rules, the application of these rules to various research areas like statistics, agriculture, medicine, measuring income inequality and the poverty level in various countries, and of course, to investment decision-making under uncertainty. The book features changes and additions to the various chapters, and also includes two completely new chapters. One deals with asymptotic SD and the relation between FSD and the maximum geometric mean (MGM) rule (or the maximum growth portfolio). The other new chapter discusses bivariate SD rules where the individual’s utility is determined not only by his own wealth, but also by his standing relative to his peer group. Stochastic Dominance: Investment Decision Making under Uncertainty, 3rd Ed. covers the following basic issues: the SD approach, asymptotic SD rules, the mean-variance (MV) approach, as well as the non-expected utility approach. The non-expected utility approach focuses on Regret Theory (RT) and mainly on prospect theory (PT) and its modified version, cumulative prospect theory (CPT) which assumes S-shape preferences. In addition to these issues the book suggests a new stochastic dominance rule called the Markowitz stochastic dominance (MSD) rule corresponding to all reverse-S-shape preferences. It also discusses the concept of the multivariate expected utility and analyzed in more detail the bivariate expected utility case. From the reviews of the second edition: "This book is an economics book about stochastic dominance. ... is certainly a valuable reference for graduate students interested in decision making under uncertainty. It investigates and compares different approaches and presents many examples. Moreover, empirical studies and experimental results play an important role in this book, which makes it interesting to read." (Nicole Bäuerle, Mathematical Reviews, Issue 2007 d)

Download or read book Econometric Analysis of Stochastic Dominance written by Yoon-Jae Whang and published by Cambridge University Press. This book was released on 2019-01-31 with total page 279 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides a comprehensive analysis of stochastic dominance through coverage of concepts, methods of estimation, inferential tools, and applications.