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Stochastic dominance via quantile regression: Working paper series--11-01

Ng, Pin and Wong, Wing-Keung and Xiao, Zhijie (2011) Stochastic dominance via quantile regression: Working paper series--11-01. Working Paper. NAU W.A. Franke College of Business.

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Abstract

We derive a new way to test for stochastic dominance between the return of two assets using a quantile regression formulation. The test statistic is a variant of the one-sided Kolmogorov-Smirnoff statistic and has a limiting distribution of the standard Brownian bridge. We also illustrate how the test statistic can be extended to test for stochastic dominance among k assets. This is useful when comparing the performance of individual assets in a portfolio against some market index. We show how the test statistic can be modified to test for stochastic dominance up to the α-quantile in situation where the return of one asset does not dominate another over the whole spectrum of the return distribution.

Item Type: Monograph (Working Paper)
Publisher’s Statement: Copyright, where appropriate, is held by the author.
ID number or DOI: 11-01
Keywords: Working paper, quantile regression, stochastic dominance, brownian bridge, test statistic
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HG Finance
NAU Depositing Author Academic Status: Faculty/Staff
Department/Unit: The W.A. Franke College of Business
Date Deposited: 17 Oct 2015 19:55
URI: http://openknowledge.nau.edu/id/eprint/1486

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