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Bootstrap tests of stochastic dominance with asymptotic similarity on the boundary

Linton, Oliver, Song, Kyungchul and Whang, Yoon-Jae (2008) Bootstrap tests of stochastic dominance with asymptotic similarity on the boundary. Econometrics Papers, EM/2008/527. Suntory Centre, London School of Economics and Political Science, London, UK.

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Abstract

We propose a new method of testing stochastic dominance which improves on existing tests based on bootstrap or subsampling. Our test requires estimation of the contact sets between the marginal distributions. Our tests have asymptotic sizes that are exactly equal to the nominal level uniformly over the boundary points of the null hypothesis and are therefore valid over the whole null hypothesis. We also allow the prospects to be indexed by infinite as well as finite dimensional unknown parameters, so that the variables may be residuals from nonparametric and semiparametric models. Our simulation results show that our tests are indeed more powerful than the existing subsampling and recentered bootstrap.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk/_new/publications/series....
Additional Information: © 2008 the authors
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C14 - Semiparametric and Nonparametric Methods
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C12 - Hypothesis Testing
C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation and Selection
Sets: Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Departments > Economics
Collections > LSE Financial Markets Group (FMG) Working Papers
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: EM/2008/527
Date Deposited: 08 Oct 2009 16:06
URL: http://eprints.lse.ac.uk/25092/

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