Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
4959649 | European Journal of Operational Research | 2017 | 39 Pages |
Abstract
Tests for stochastic dominance constructed by translating the inference problem of stochastic dominance into parameter restrictions in quantile regressions are proposed. They are variants of the one-sided Kolmogorov-Smirnoff statistic with a limiting distribution of the standard Brownian bridge. The procedure to obtain the critical values of our proposed test statistics are provided. Simulation results show their superior size and power. They are applied to the NASDAQ 100 and S&P 500 indices to investigate dominance relationship before and after major turning points. Results show no arbitrage opportunity between the bear and bull markets. Our results infer that markets are inefficient and risk averters are better off investing in the bull rather than the bear market.
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Pin Ng, Wing-Keung Wong, Zhijie Xiao,