Abstract
We derive empirical tests for the stochastic dominance efficiency of a given portfolio with respect to all possible portfolios constructed from a set of assets. The tests 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 results could provide a stimulus to the further proliferation of stochastic dominance for the problem of portfolio selection and evaluation. Using our tests, the Fama and French market portfolio is significantly inefficient relative to benchmark portfolios formed on market capitalization and book-to-market equity ratio.
| Original language | English |
|---|---|
| Pages (from-to) | 1905-1931 |
| Number of pages | 27 |
| Journal | Journal of Finance |
| Volume | 58 |
| Issue number | 5 |
| Publication status | Published - Oct 2003 |
| Externally published | Yes |
Fingerprint
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
Cite this
Empirical Tests for Stochastic Dominance Efficiency. / Post, Thierry.
In: Journal of Finance, Vol. 58, No. 5, 10.2003, p. 1905-1931.Research output: Contribution to journal › Review article
}
TY - JOUR
T1 - Empirical Tests for Stochastic Dominance Efficiency
AU - Post, Thierry
PY - 2003/10
Y1 - 2003/10
N2 - We derive empirical tests for the stochastic dominance efficiency of a given portfolio with respect to all possible portfolios constructed from a set of assets. The tests 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 results could provide a stimulus to the further proliferation of stochastic dominance for the problem of portfolio selection and evaluation. Using our tests, the Fama and French market portfolio is significantly inefficient relative to benchmark portfolios formed on market capitalization and book-to-market equity ratio.
AB - We derive empirical tests for the stochastic dominance efficiency of a given portfolio with respect to all possible portfolios constructed from a set of assets. The tests 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 results could provide a stimulus to the further proliferation of stochastic dominance for the problem of portfolio selection and evaluation. Using our tests, the Fama and French market portfolio is significantly inefficient relative to benchmark portfolios formed on market capitalization and book-to-market equity ratio.
UR - http://www.scopus.com/inward/record.url?scp=0142219308&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0142219308&partnerID=8YFLogxK
M3 - Review article
VL - 58
SP - 1905
EP - 1931
JO - Journal of Finance
JF - Journal of Finance
SN - 0022-1082
IS - 5
ER -