Testing for Second-Order Stochastic Dominance of Two Distributions
- 1 August 1994
- journal article
- research article
- Published by Cambridge University Press (CUP) in Econometric Theory
- Vol. 10 (5) , 849-866
- https://doi.org/10.1017/s0266466600008884
Abstract
A distribution function F is said to stochastically dominate another distribution function G in the second-order sense if , for all x. Second-order stochastic dominance plays an important role in economics, finance, and accounting. Here a statistical test has been constructed to test , for some x ∈ [a, b], against the hypothesis , for all x ∈ [a, b], where a and b are any two real numbers. The test has been shown to be consistent and has an upper bound α on the asymptotic size. The test is expected to have usefulness for comparison of random prospects for risk averters.Keywords
This publication has 14 references indexed in Scilit:
- Testing for second order stochastic dominanceCommunications in Statistics - Theory and Methods, 1985
- Testing Hypotheses Concerning Unions of Linear SubspacesJournal of the American Statistical Association, 1984
- Testing Hypotheses concerning Unions of Linear SubspacesJournal of the American Statistical Association, 1984
- An Efficient Algorithm to Determine Stochastic Dominance Admissible SetsManagement Science, 1979
- Stochastic Dominance and the Maximization of Expected UtilityThe Review of Economic Studies, 1976
- Optimal rules for ordering uncertain prospectsJournal of Financial Economics, 1975
- Efficient Algorithms for Conducting Stochastic Dominance Tests on Large Numbers of PortfoliosJournal of Financial and Quantitative Analysis, 1973
- A Course in Probability Theory. By K. L. Chung. Pp. vii, 331. £6·20. 1968. (Harcourt, Brace and World.) - Introduction to Probability and Statistics. By M. Goldman. Pp. xv, 546. £5·50. 1970. (Harcourt, Brace and World.) - Probability and Statistical Inference. By R. G. Krutchkoff. Pp. xiv, 306. £5·25. 1970. (Gordon and Breach.)The Mathematical Gazette, 1972
- Stochastic dominance and diversificationJournal of Economic Theory, 1971
- The Efficiency Analysis of Choices Involving RiskThe Review of Economic Studies, 1969