An empirical analysis of marginal conditional stochastic dominance

作者：Clark Ephraim; Kassimatis Konstantinos^*

来源：Journal of Banking & Finance, 2012, 36(4): 1144-1151.

DOI：10.1016/j.jbankfin.2011.11.006

• Marginal conditional stochastic dominance
• Stock returns
• Arbitrage portfolios

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.

• 出版日期2012-4