An empirical analysis of marginal conditional stochastic dominance

Article


Clark, E. and Kassimatis, K. 2012. An empirical analysis of marginal conditional stochastic dominance. Journal of Banking and Finance. 36 (4), pp. 1144-1151. https://doi.org/10.1016/j.jbankfin.2011.11.006
TypeArticle
TitleAn empirical analysis of marginal conditional stochastic dominance
AuthorsClark, E. and Kassimatis, K.
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.

PublisherElsevier
JournalJournal of Banking and Finance
ISSN0378-4266
Publication dates
PrintApr 2012
Publication process dates
Deposited06 Mar 2012
Output statusPublished
Digital Object Identifier (DOI)https://doi.org/10.1016/j.jbankfin.2011.11.006
LanguageEnglish
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