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Bootstrap Tests Of Mean-Variance Efficiency With Multiple Portfolio Groupings

Author

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  • Gungor, Sermin

    (Bank of Canada)

  • Luger, Richard

    (Université Laval)

Abstract

We propose double bootstrap methods to test the mean-variance efficiency hypothesis when multiple portfolio groupings of the test assets are considered jointly rather than individually. A direct test of the joint null hypothesis may not be possible with standard methods when the total number of test assets grows large relative to the number of available time-series observations, since the estimate of the disturbance covariance matrix eventually becomes singular. The suggested residual bootstrap procedures based on combining the individual group p-values avoid this problem while controlling the overall significance level. Simulation and empirical results illustrate the usefulness of the joint mean-variance efficiency tests.

Suggested Citation

  • Gungor, Sermin & Luger, Richard, 2015. "Bootstrap Tests Of Mean-Variance Efficiency With Multiple Portfolio Groupings," L'Actualité Economique, Société Canadienne de Science Economique, vol. 91(1-2), pages 35-65, Mars-Juin.
    • Handle: RePEc:ris:actuec:0112
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    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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