Testing for Third-Order Stochastic Dominance with Diversification Possibilities

We derive an empirical test for third-order stochastic dominance that allows for diversification between choice alternatives. The test 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 approach is illustrated using real-life US stock market data.

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Year of publication:	2002-02-05
Authors:	Post, G.T.
Institutions:	Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
Subject:	portfolio selection \| portfolio evaluation \| stochastic dominance \| efficiency \| linear programming

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Extent:	application/pdf
Series:	Research Paper. - ISSN 1566-5283.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series RePEc:dgr:eureri Number ERS-2002-02-F&A
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005450982