Please use this identifier to cite or link to this item:

Title: Testing for central dominance: Method and application
Authors: Chuang, O-Chia;Kuan, Chung-Ming;Tzeng, Larry Y.
Contributors: 風管系
Keywords: Central dominance;Contact set;Functional inequality;Portfolio selection;Stochastic dominance
Date: 2017-02
Issue Date: 2017-08-21 16:51:09 (UTC+8)
Abstract: Central dominance (CD) introduced in Gollier (1995, Journal of Economic Theory) is a risk concept that differs from stochastic dominance (SD) in an important way. In particular, CD implies a deterministic comparative static of a change in decision when risk changes, but SD does not have such an implication. In this paper, we propose the first test of central dominance, which amounts to checking a functional inequality. We derive the asymptotic distribution of a lower bound of the proposed test and suggest a bootstrap procedure to compute the critical values. We also conduct simulations to evaluate the performance of this test. Our empirical study finds clear evidence of CD relations between the S&P 500 index return distributions during 2001–2013 and results in unambiguous implications for investment decisions.
Relation: Journal of Econometrics,Volume 196, Issue 2, Pages 368-378
Data Type: article
DOI 連結:
Appears in Collections:[風險管理與保險學系 ] 期刊論文

Files in This Item:

File Description SizeFormat
378.pdf746KbAdobe PDF316View/Open

All items in 學術集成 are protected by copyright, with all rights reserved.

社群 sharing