LP Tests for MV Efficiency

Thierry Post

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: We derive empirical tests for the mean-variance efficiency of a given portfolio. The tests can be computed using straightforward linear programming, and they give substantial flexibility in modeling the investment possibilities. Using this test, we can reject the hypothesis that the S&P 500 index is mean-variance efficient relative to the 25 Fama and French (1993) equity portfolios.

Keywords: linear programming; mean-variance analysis; portfolio selection and evaluation; quadratic programming (search for similar items in EconPapers)
JEL-codes: C11 C60 G3 M (search for similar items in EconPapers)
Date: 2001-11-30
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Persistent link: https://EconPapers.repec.org/RePEc:ems:eureri:130

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