The Sensitivity in Tests of the Efficiency of a Portfolio and Portfolio Performance Measurement
QUARTERLY REVIEW OF ECONOMICS AND FINANCE, Vol 35 No 2, Summer 1995
Posted: 25 Aug 1998
A theoretical rationale and empirical evidence for the sensitivity of the test of the efficiency of a given portfolio (or the test of the CAPM if appropriately designed) are provided. Stock and bond data are employed as the 'left-hand-side' assets to show that a misspecification in the 'left-hand-side' (or LHS) assets may cause the sensitivity in testing the efficiency of a given portfolio and the measurement in portfolio performance. Also, the results support the use of an 'asset class factor model' in measuring portfolio performance.
JEL Classification: G11
Suggested Citation: Suggested Citation