A Monte Carlo Investigation of Some Tests for Stochastic Dominance

Publication Type

Journal Article

Publication Date

2004

Abstract

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.

Keywords

Burr distribution, Income distribution, Monte Carlo method, Portfolio investment, Stochastic dominance, Union-intersection test

Discipline

Econometrics

Research Areas

Econometrics

Publication

Journal of Statistical Computation and Simulation

Volume

74

Issue

5

First Page

361

Last Page

378

ISSN

0094-9655

Identifier

10.1080/00949650310001593221

Publisher

Taylor and Francis

Additional URL

https://doi.org/10.1080/00949650310001593221

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