Testing for prospect and Markowitz stochastic dominance efficiency
نویسندگان
چکیده
منابع مشابه
Prospect and Markowitz Stochastic Dominance
Levy and Levy (2002, 2004) develop the Prospect and Markowitz stochastic dominance theory with S-shaped and reverse S-shaped utility functions for investors. In this paper, we extend Levy and Levy’s Prospect Stochastic Dominance theory (PSD) and Markowitz Stochastic Dominance theory (MSD) to the first three orders and link the corresponding S-shaped and reverse S-shaped utility functions to the...
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We consider consistent tests for stochastic dominance efficiency at any order of a given portfolio with respect to all possible portfolios constructed from a set of assets. We propose and justify approaches based on simulation and the block bootstrap to achieve valid inference in a time series setting. The test statistics and the estimators are computed using linear and mixed integer programmin...
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Levy and Levy (2002, 2004) and others extend the stochastic dominance (SD) theory for risk averters and risk seekers by developing the prospect SD (PSD) and Markowitz SD (MSD) theory for investors with S-shaped and reverse S-shaped utility functions. Davidson and Duclos (2000) and others develop an SD test for risk averters while Wong, et al. (2007) develop an SD test for risk seekers. In this ...
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Stochastic Dominance (SD) rules are used to divide the sets of all feasible uncertain prospects into efficient and inefficient sets (partial ordering). The SD rules (as well as the mean-variance rule) assume that investors agree on the available distributions of returns. Laboratory experiments with and without real money repeatedly reveal that even if all subjects observe the same pair of cumul...
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We propose a new statistical test of the stochastic dominance effi ciency of a given portfolio over a class of portfolios. We establish its null and alternative asymptotic properties, and define a method for consistently estimating critical values. We present some numerical evidence that our tests work well in moderate sized samples.
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ژورنال
عنوان ژورنال: Journal of Econometrics
سال: 2017
ISSN: 0304-4076
DOI: 10.1016/j.jeconom.2017.01.006