Consistent Testing for Stochastic Dominance: A Subsampling Approach
We propose a procedure for estimating the critical values of the Klecan, McFadden, and McFadden (1990) test for ﬁrst and second order stochastic dominance in the general k -prospect case. Our method is based on subsampling bootstrap. We show that the resulting test is consistent. We allow for correlation amongst the prospects and for the observations to be autocorrelated over time. Importantly, the prospects may be the residuals from certain conditional models.
Linton, Oliver B.; Maasoumi, Esfandiar; and Whang, Yoon-Jae, "Consistent Testing for Stochastic Dominance: A Subsampling Approach" (2002). Cowles Foundation Discussion Papers. 1620.