Testing for Third-Order Stochastic Dominance with Diversification Possibilities
2002-02-05
Research Paper
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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.
Keywords
Classifications using
Journal of Economic Literature (JEL) Classification System
- G3 : Corporate Finance and Governance
- M : Business Administration and Business Economics; Marketing; Accounting
- C19 : Econometric and Statistical Methods: Other
Automatically Extracted Terms
- portfolio
- utility
- function
- distribution
- utility function
- return
- efficiency
- asset
- market index
- statistic
- index
- dominance
- result
- research
- market
- analysis
- management
- observation
- july 1926
- finance
