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The Econometrics Of Mean-Variance Efficiency Tests: A Survey

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  • Enrique Sentana

    ()
    (CEMFI, Centro de Estudios Monetarios y Financieros)

Abstract

This paper provides a comprehensive survey of the econometrics of mean-variance efficiency tests. Starting with the classic F test of Gibbons, Ross and Shanken (1989) and its generalised method of moments version, I analyse the effects of the number of assets and portfolio composition on test power. I then discuss asymptotically equivalent tests based on mean representing portfolios and Hansen-Jagannathan frontiers, and study the trade-offs between efficiency and robustness of using parametric and semiparametric likelihood procedures that assume either elliptical innovations or elliptical returns. After reviewing finite sample tests, I conclude with a discussion of mean-variance-skewness efficiency and spanning tests.

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Paper provided by CEMFI in its series Working Papers with number wp2008_0807.

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Date of creation: May 2008
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Handle: RePEc:cmf:wpaper:wp2008_0807

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Keywords: Elliptical distributions; exogeneity; financial returns; generalised method of moments; linear factor pricing; maximum likelihood; portfolio choice; stochastic discount factor.;

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  2. Manuel Arellano & Lars Peter Hansen & Enrique Sentana, 2009. "Underidentification?," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP24/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  3. Roberto Serrano, 2009. "On Watson's Non-Forcing Contracts and Renegotiation," Economics Bulletin, AccessEcon, vol. 29(3), pages 2350-2360.
  4. Roberto Serrano & Rajiv Vohra, 2009. "Multiplicity of mixed equilibria in mechanisms: A unified approach to exact and approximate implementation," Working Papers, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales 2009-08, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  5. Natalia Bailey & Vanessa Smith & Hashem Pesaran, 2014. "A multiple testing approach to the regularisation of large sample correlation matrices," Cambridge Working Papers in Economics 1413, Faculty of Economics, University of Cambridge.
  6. Repullo, Rafael & Suarez, Javier, 2008. "The Procyclical Effects of Basel II," CEPR Discussion Papers 6862, C.E.P.R. Discussion Papers.
  7. Alexios Ghalanos & Eduardo Rossi & Giovanni Urga, 2012. "Independent Factor Autoregressive Conditional Density Model," DEM Working Papers Series 021, University of Pavia, Department of Economics and Management.
  8. Beaulieu, Marie-Claude & Dufour, Jean-Marie & Khalaf, Lynda, 2010. "Asset-pricing anomalies and spanning: Multivariate and multifactor tests with heavy-tailed distributions," Journal of Empirical Finance, Elsevier, Elsevier, vol. 17(4), pages 763-782, September.
  9. Max Bruche, 2009. "Bankruptcy Codes, Liquidation Timing, And Debt Valuation," Working Papers, CEMFI wp2009_0902, CEMFI.

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