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G.T. Post (Thierry)

2002-02-05

Testing for Third-Order Stochastic Dominance with Diversification Possibilities

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Publication

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.

Additional Metadata
Keywords efficiency, linear programming, portfolio evaluation, portfolio selection, stochastic dominance
JEL Econometric and Statistical Methods: Other (jel C19), Corporate Finance and Governance (jel G3), Business Administration and Business Economics; Marketing; Accounting (jel M)
Publisher Erasmus Research Institute of Management
Persistent URL hdl.handle.net/1765/164
Series ERIM Report Series Research in Management
Rights Copyright 2002, G.T. Post, This report in the ERIM Report Series Research in Management is intended as a means to communicate the results of recent research to academic colleagues and other interested parties. All reports are considered as preliminary and subject to possibly major revisions. This applies equally to opinions expressed, theories developed, and data used. Therefore, comments and suggestions are welcome and should be directed to the authors.
Organisation Erasmus Research Institute of Management
Citation
Post, T. (2002). Testing for Third-Order Stochastic Dominance with Diversification Possibilities (No. ERS-2002-02-F&A). ERIM Report Series Research in Management. Retrieved from http://hdl.handle.net/1765/164
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