Using Bootstrap to Test Portfolio Efficiency

Pin-Huang Chou and Guofu Zhou
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Pin-Huang Chou: National Central University

Annals of Economics and Finance, 2006, vol. 7, issue 2, 217-249

Abstract: To facilitate wide use of the bootstrap method in finance, this paper shows by intuitive arguments and by simulations how it can improve upon existing tests to allow less restrictive distributional assumptions on the data and to yield more reliable (higher-order accurate) asymptotic inference. In particular, we apply the method to examine the efficiency of CRSP value-weighted stock index, and to test the well-known Fama and French (1993) three-factor model. We find that existing tests tend to over-reject.

Keywords: Bootstrap; Efficiency; GMM test; Elliptical distribution (search for similar items in EconPapers)
JEL-codes: C13 C53 G14 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2006:v:7:i:2:p:217-249

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