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A CROSS‐SECTIONAL REGRESSION TEST OF THE MEAN‐VARIANCE EFFICIENCY OF AN AUSTRALIAN VALUE WEIGHTED MARKET PORTFOLIO
Author(s) -
Wood Justin
Publication year - 1991
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.1991.tb00167.x
Subject(s) - econometrics , portfolio , statistics , multivariate statistics , variance (accounting) , statistic , test (biology) , market portfolio , test statistic , economics , value (mathematics) , regression analysis , regression , mathematics , statistical hypothesis testing , financial economics , paleontology , accounting , biology
This paper tests the Mean‐Variance efficiency of a value weighted Australian market portfolio using a multivariate cross‐sectional regression approach developed by Shanken (1985). This test methodology is sufficiently powerful to reject the null hypothesis that the market portfolio is ex ante Mean‐Variance efficient when test assets are constructed on the basis of size (market capitalisation). However, when test assets are constructed on the basis of industry classification the model is unable to reject the Mean‐Variance efficiency of the market portfolio. This test statistic provides some useful diagnostics which are examined in the paper.