centre for microdata methods and practice

ESRC centre

cemmap is an ESRC research centre

ESRC

Keep in touch

Subscribe to cemmap news

Consistent testing for stochastic dominance: a subsampling approach

Authors: Oliver Linton , Esfandiar Maasoumi and Yoon-Jae Wang
Date: 01 July 2005
Type: Journal Article, Review of Economic Studies, Vol. 72, No. 3, pp. 735-765

Abstract

We propose a procedure for estimating the critical values of the extended Kolmogorov- Smirnov tests of First and Second Order Stochastic Dominance in the general K-prospect case. We allow for the observations to be serially dependent and, for the ナrst time, we can accommodate general dependence amongst the prospects which are to be ranked. Also, the prospects may be the residuals from certain conditional models, opening the way for conditional ranking. We also propose a test of Prospect Stochastic Dominance. Our method is based on subsampling and we show that the resulting tests are consistent and powerful against some Nᄀ1=2 local alternatives. We also propose some heuristic methods for selecting subsample size and demonstrate in simulations that they perform reasonably.

Previous version:
Oliver Linton, Esfandiar Maasoumi and Yoon-Jae Wang December 2002, Consistent testing for stochastic dominance: a subsampling approach, cemmap Working Paper, CWP03/02, IFS

Publications feeds

Subscribe to cemmap working papers via RSS

Search cemmap

Search by title, topic or name.

Contact cemmap

Centre for Microdata Methods and Practice

How to find us

Tel: +44 (0)20 7291 4800

E-mail us