Multivariate Tests for Stochastic Dominance Efficiency of a Given Portfolio
We develop empirical tests for stochastic dominance efficiency of a given investment portfolio relative to all possible portfolios formed from a given set of assets. Our tests use multivariate statistics, which result in superior statistical power properties compared to existing stochastic dominance efficiency tests and increase the comparability with existing mean-variance efficiency 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.
Year of publication: |
2007
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Authors: | Post, Thierry ; Versijp, Philippe |
Published in: |
Journal of Financial and Quantitative Analysis. - Cambridge University Press. - Vol. 42.2007, 02, p. 489-515
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Publisher: |
Cambridge University Press |
Description of contents: | Abstract [journals.cambridge.org] |
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