Consistent Testing for Stochastic Dominance: A Subsampling Approach

We propose a procedure for estimating the critical values of the Klecan, McFadden, and McFadden (1990) test for first and second order stochastic dominance in the general k-prospect case. Our method is based on subsampling bootstrap. We show that the resulting test is consistent. We allow for correlation amongst the prospects and for the observations to be autocorrelated over time. Importantly, the prospects may be the residuals from certain conditional models.

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Year of publication:	2002-02
Authors:	Linton, Oliver ; Maasoumi, Esfandiar ; Whang, Yoon-Jae
Institutions:	Cowles Foundation for Research in Economics, Yale University
Subject:	Bootstrap \| Prospect theory \| Stochastic dominance

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Extent:	application/pdf
Series:	Cowles Foundation Discussion Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Published in Review of Economic Studies (2005), 72, 735-765, Corrigendum (2007), 75: 1-5 The price is None Number 1356 51 pages
Classification:	C12 - Hypothesis Testing ; C14 - Semiparametric and Nonparametric Methods ; C15 - Statistical Simulation Methods; Monte Carlo Methods ; C52 - Model Evaluation and Testing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005593569