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 language | English |
|---|---|
| Pages (from-to) | 489-516 |
| Number of pages | 28 |
| Journal | Journal of Financial and Quantitative Analysis |
| Volume | 42 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - Jun 2007 |
| Externally published | Yes |
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics