A direct test for the mean variance efficiency of a portfolio

Gopal Basak, Ravi Jagannathan*, Guoqiang Sun

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

19 Scopus citations

Abstract

We develop a direct test for examining the mean-variance efficiency of a given bench-mark asset return. Unlike traditional tests for mean-variance efficiency, 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 efficient 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.

Original languageEnglish (US)
Pages (from-to)1195-1215
Number of pages21
JournalJournal of Economic Dynamics and Control
Volume26
Issue number7-8
DOIs
StatePublished - 2002

Keywords

  • Bench-mark asset
  • Mean-variance efficiency
  • Stocks
  • Test

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics

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