BOOTSTRAP TESTS OF MEAN-VARIANCE EFFICIENCY WITH MULTIPLE PORTFOLIO GROUPINGS

Sermin Gungor () and Richard Luger
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Sermin Gungor: Bank of Canada

L'Actualité Economique, 2015, vol. 91, issue 1-2, 35-65

Abstract: We propose double bootstrap methods to test the mean-variance efficiency hypothesis when multiple portfolio groupings of the test assets are considered jointly rather than individually. A direct test of the joint null hypothesis may not be possible with standard methods when the total number of test assets grows large relative to the number of available time-series observations, since the estimate of the disturbance covariance matrix eventually becomes singular. The suggested residual bootstrap procedures based on combining the individual group p-values avoid this problem while controlling the overall significance level. Simulation and empirical results illustrate the usefulness of the joint mean-variance efficiency tests.

Date: 2015
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Related works:
Working Paper: Bootstrap Tests of Mean-Variance Efficiency with Multiple Portfolio Groupings (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:actuec:0112

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