Spanning Tests in Return and Stochastic Discount Factor Mean Variance Frontiers: A Unifying Approach

Enrique Sentana and Peñaranda, Francisco

No 4422, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We propose new approaches to test for spanning in the return and stochastic discount factor mean-variance frontiers, which assess if either the centred or uncentred mean and cost representing portfolios are shared by the initial and extended sets of assets. We show that our proposed tests are asymptotically equivalent to the existing spanning tests under the null and sequences of local alternatives, and analyse their asymptotic relative efficiency. We also extend the theory of optimal GMM inference to deal with the singularities that arise in some spanning tests. Finally, we include an empirical application to money markets in Europe.

Keywords: Asset pricing; Asymptotic slopes; Gmm; Representing portfolios; Singular covariance; Matrix (search for similar items in EconPapers)
JEL-codes: C12 C13 G11 G12 (search for similar items in EconPapers)
Date: 2004-06
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Spanning tests in return and stochastic discount factor mean–variance frontiers: A unifying approach (2012)
Working Paper: Spanning tests in return and stochastic discount factor mean-variance frontiers: A unifying approach (2010)
Working Paper: Spanning Tests in Return and Stochastic Discount Factor Mean-Variance Frontiers: A Unifying Approach (2004)
Working Paper: Spanning Tests in Return and Stochastic Discount Factor Mean-Variance Frontiers: A Unifying Approach (2004)
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