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The Sampling Error in Estimates of Mean-Variance Efficient Portfolio Weights

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Mark Britten-Jones (London Business School)
Abstract

This paper presents an exact finite-sample statistical procedure for testing hypotheses about the weights of mean-variance efficient portfolios. The estimation and inference procedures on efficient portfolio weights are performed in the same way as for the coefficients in an OLS regression. OLS "t"- and "F"-statistics can be used for tests on efficient weights, and when returns are multivariate normal, these statistics have exact "t" and "F" distributions in a finite sample. Using 20 years of data on 11 country stock indexes, we find that the sampling error in estimates of the weights of a global efficient portfolio is large. Copyright The American Finance Association 1999.

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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 54 (1999)
Issue (Month): 2 (04)
Pages: 655-671
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Handle: RePEc:bla:jfinan:v:54:y:1999:i:2:p:655-671

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