Multivariate tests for stochastic dominance efficiency of a given portfolio

Thierry Post, Philippe Versijp

Research output: Contribution to journalReview article

25 Citations (Scopus)

Abstract

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. COPYRIGHT 2007, SCHOOL OF BUSINESS ADMINISTRATION, UNIVERSITY OF WASHINGTON.

Original languageEnglish
Pages (from-to)489-516
Number of pages28
JournalJournal of Financial and Quantitative Analysis
Volume42
Issue number2
Publication statusPublished - Jun 2007
Externally publishedYes

Fingerprint

Multivariate tests
Stochastic dominance
Inefficiency
Empirical test
Mean-variance efficiency
Tail risk
Investment portfolio
Multivariate statistics
Business Administration
Statistical power
Assets
Mean-variance

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Multivariate tests for stochastic dominance efficiency of a given portfolio. / Post, Thierry; Versijp, Philippe.

In: Journal of Financial and Quantitative Analysis, Vol. 42, No. 2, 06.2007, p. 489-516.

Research output: Contribution to journalReview article

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