The Econometrics of Mean-Variance Efficiency Tests: A Survey

Enrique Sentana

Working Papers from CEMFI

Abstract: This paper provides a comprehensive survey of the econometrics of mean-variance efficiency tests. Starting with the classic F test of Gibbons, Ross and Shanken (1989) and its generalised method of moments version, I analyse the effects of the number of assets and portfolio composition on test power. I then discuss asymptotically equivalent tests based on mean representing portfolios and Hansen-Jagannathan frontiers, and study the trade-offs between efficiency and robustness of using parametric and semiparametric likelihood procedures that assume either elliptical innovations or elliptical returns. After reviewing finite sample tests, I conclude with a discussion of mean-variance-skewness efficiency and spanning tests.

Date: 2008-05
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Journal Article: The econometrics of mean-variance efficiency tests: a survey (2009)
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