A Test for Mean-Variance Efficiency of a Given Portfolio Under Restrictions

24 Pages Posted: 29 Feb 2008

See all articles by Thierry Post

Thierry Post

Graduate School of Business of Nazarbayev University

Date Written: 28 2005 6,

Abstract

This study proposes a test for mean-variance efficiency of a given portfolio under general linear investment restrictions. We introduce a new definition of pricing error or “alpha” and as an efficiency measure we propose to use the largest positive alpha for any vertex of the portfolio possibilities set. To allow for statistical inference, we derive the asymptotic least favorable sampling distribution of this test statistic. Using the new test, we cannot reject market portfolio efficiency relative to beta decile stock portfolios if short-selling is not allowed.

Keywords: mean-variance efficiency, portfolio constraints, asset pricing, portfolio analysis

JEL Classification: M, G3, G12

Suggested Citation

Post, Thierry, A Test for Mean-Variance Efficiency of a Given Portfolio Under Restrictions (28 2005 6,). ERIM Report Series Reference No. ERS-2005-032-F&A, Available at SSRN: https://ssrn.com/abstract=1100292

Thierry Post (Contact Author)

Graduate School of Business of Nazarbayev University ( email )

53 Kabanbay Batyra Avenue
Astana, 010000
Kazakhstan

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
195
Abstract Views
1,199
rank
172,187
PlumX Metrics