A direct test for the mean variance efficiency of a portfolio

✍ Scribed by Gopal Basak; Ravi Jagannathan; Guoqiang Sun

• Publisher: Elsevier Science
• Year: 2002
• Tongue: English
• Weight: 178 KB
• Volume: 26
• Category: Article
• ISSN: 0165-1889
• DOI: 10.1016/s0165-1889(01)00044-6

✦ Synopsis

We develop a direct test for examining the mean-variance e ciency of a given bench-mark asset return. Unlike traditional tests for mean-variance e ciency, this test allows for the possibility that short positions in the primitive assets may not be possible. Using this test, we cannot reject the hypothesis that the value weighted return on exchange traded stocks is mean-variance e cient with reference to the mean-variance frontier generated by the 25 stock portfolios constructed by Fama and French (J. Financial Econom. 33 (1993) 3), when short selling is not allowed.