A Monte Carlo Investigation of Some Tests for Stochastic Dominance
This paper compares the performance of several tests for stochastic dominance up to order three using Monte Carlo methods. The tests considered are the Davidson and Duclos (2000) test, the Anderson test (1996) and the Kaur, Rao and Singh (1994) test. Only unpaired samples of independent observations are considered, as this is a restriction for both the Anderson and Kaur-Rao-Singh tests. We find that the Davidson-Duclos test appears to be the best. The Kaur-Rao-Singh test is overly conservative and does not compare favorably against the Davidson-Duclos and Anderson tests in terms of power.
Burr distribution, Income distribution, Monte Carlo method, Portfolio investment, Stochastic dominance, Union-intersection test
Journal of Statistical Computation and Simulation
Taylor and Francis
TSE, Yiu Kuen and Zhang, Xibin.
A Monte Carlo Investigation of Some Tests for Stochastic Dominance. (2004). Journal of Statistical Computation and Simulation. 74, (5), 361-378. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/129