Using Bootstrap to Test Mean-Variance Efficiency of a Given Portfolio

Pin-Huang Chou
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Pin-Huang Chou: National Central University

Finance from University Library of Munich, Germany

Abstract: This paper proposes tests of unconditional mean-variance efficiency using bootstrap method that does not depend on specific distributional assumptions. We reject the mean-variance efficiency of the CRSP value- weighted stock index for five of the seven consecutive ten-year subperiods from 1926 to 1993, whereas the F-test of Gibbons, Ross, and Shanken (GRS, 1989) only rejects two of the seven subperiods. A further examination of the size of the tests reveals that, under various alternative distributional specifications for the error terms, the GRS test tends to over-reject the null hypothesis, while the bootstrap test has sizes close to the nominal levels. However, the GRS test has a slightly higher power than the bootstrap test.

Keywords: bootstrap hypothesis test; mean-variance efficiency; elliptical distribution (search for similar items in EconPapers)
JEL-codes: C13 C53 G14 (search for similar items in EconPapers)
Pages: 24 pages
Date: 1996-09-09
Note: Type of Document - Tex ; prepared on IBM PC - PC-TEX; to print on PostScript; pages: 24; figures: .
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:9609002

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