An empirical analysis of marginal conditional stochastic dominance

Clark, Ephraim A. and Kassimatis, Konstantinos (2012) An empirical analysis of marginal conditional stochastic dominance. Journal of Banking & Finance, 36 (4) . pp. 1144-1151. ISSN 0378-4266 [Article] (doi:10.1016/j.jbankfin.2011.11.006)

Abstract

Stochastic dominance is a more general approach to expected utility maximization than the widely accepted mean-variance analysis. However, when applied to portfolios of assets, stochastic dominance rules become too complicated for meaningful empirical analysis, and, thus, its practical relevance has been difficult to establish. This paper develops a framework based on the concept of Marginal Conditional Stochastic Dominance (MCSD), introduced by Shalit and Yitzhaki (1994), to test for the first time the relationship between second order stochastic dominance (SSD) and stock returns. We find evidence that MCSD is a significant determinant of stock returns. Our results are robust with respect to the most popular pricing models.

Actions (login required)

View Item

Statistics

DownloadsShow export options

Export as CSVXMLJSON

Activity Overview

6 month trend

0Downloads

6 month trend

413Hits

Additional statistics are available via IRStats2.