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Can risk-free and zero-beta portfolios be constructed? UK and US Evidence

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  • He, Zhen
  • O'Connor, Fergal
  • Thijssen, Jacco

Abstract

This paper determines whether a risk-free portfolio can be formed using gold, T-bills, silver, platinum, and palladium. We construct zero-variance portfolios composed of two assets showing that it is possible to construct risk-free portfolios based on zero variance. We apply Wald tests to Black's zero-beta CAPM to examine whether these constructed risk-free portfolios qualify as zero-beta portfolios. We find that a risk-free portfolio is not always a zero-beta portfolio. Results show that a risk-free portfolio and a zero-beta portfolio in one market is not necessarily so in another.

Suggested Citation

  • He, Zhen & O'Connor, Fergal & Thijssen, Jacco, 2025. "Can risk-free and zero-beta portfolios be constructed? UK and US Evidence," Economics Letters, Elsevier, vol. 250(C).
    • Handle: RePEc:eee:ecolet:v:250:y:2025:i:c:s0165176525001454
    DOI: 10.1016/j.econlet.2025.112308
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