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LP Tests for MV Efficiency

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Author Info
Post, G.T. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
Abstract

We derive empirical tests for the mean-variance efficiency of a given portfolio. The tests can be computed using straightforward linear programming, and they give substantial flexibility in modeling the investment possibilities. Using this test, we can reject the hypothesis that the S&P 500 index is mean-variance efficient relative to the 25 Fama and French (1993) equity portfolios.

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File URL: http://hdl.handle.net/1765/130
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Publisher Info
Paper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam. in its series Research Paper with number ERS-2001-66-F&A Revision_Date: 2009-10-26.

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Date of creation: 30 Nov 2001
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Handle: RePEc:dgr:eureri:2001126

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Web page: http://www.erim.eur.nl/

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Related research
Keywords: portfolio selection and evaluation; mean-variance analysis; quadratic programming; linear programming;

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. Levy, Haim & Hanoch, Giora, 1970. "Relative Effectiveness of Efficiency Criteria for Portfolio Selection," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 5(01), pages 63-76, March. [Downloadable!]
  2. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March. [Downloadable!] (restricted)
  3. Hanoch, G & Levy, Haim, 1969. "The Efficiency Analysis of Choices Involving Risk," Review of Economic Studies, Blackwell Publishing, vol. 36(107), pages 335-46, July. [Downloadable!] (restricted)
  4. Meyer, Jack, 1979. "Mean-Variance Efficient Sets and Expected Utility," Journal of Finance, American Finance Association, vol. 34(5), pages 1221-29, December. [Downloadable!] (restricted)
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This page was last updated on 2009-12-9.

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