A New Linear Programming Approach to Bond Portfolio Management: A Comment

Michael C. Ehrhardt

Journal of Financial and Quantitative Analysis, 1989, vol. 24, issue 4, 533-537

Abstract: An analysis of the dual problem described by Ronn (1987) reveals that it provides a powerful and easily interpretable test for the hypothesis of a single class of marginal investors, including models of equilibrium based on a “representative tax bracket.” When Ronn's empirical tests are interpreted via the dual, they lend additional support to his conclusions in providing a strong rejection of the representative tax bracket hypothesis. A valid dual LP used to test the hypothesis can be obtained with fewer assumptions than Ronn's primal; in addition, a minor error in Ronn's presentation of the dual is corrected.

Date: 1989
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