Is the Market Portfolio Efficient? A New Test of Mean-Variance Efficiency when All Assets Are Risky

Marie Brière (), Bastien Drut, Valérie Mignon (), Kim Oosterlinck and Ariane Szafarz

No 12-003, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: The market portfolio efficiency remains controversial. This paper develops a new test of portfolio mean-variance efficiency relying on the realistic assumption that all assets are risky. The test is based on the vertical distance of a portfolio from the efficient frontier. Monte Carlo simulations show that our test outperforms the previous mean-variance efficiency tests for large samples since it produces smaller size distortions for comparable power. Our empirical application to the U.S. equity market highlights that the market portfolio is not mean-variance efficient, and so invalidates the zero-beta CAPM.

Keywords: Efficient portfolio; mean-variance efficiency; efficiency test. (search for similar items in EconPapers)
JEL-codes: C12 G11 G12 (search for similar items in EconPapers)
Pages: 37 p.
Date: 2012-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published by:

Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/107868/1/wp12003.pdf wp12003 (application/pdf)

Related works:
Journal Article: Is the Market Portfolio Efficient? A New Test of Mean-Variance Efficiency when all Assets are Risky (2013)
Working Paper: Is the Market Portfolio Efficient? A New Test of Mean-Variance Efficiency when all Assets are Risky (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sol:wpaper:2013/107868

Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... lb.ac.be:2013/107868

Access Statistics for this paper

More papers in Working Papers CEB from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels ().