Nonparametric Tests of Conditional Mean-Variance Efficiency of a Benchmark Portfolio

37 Pages Posted: 11 Feb 2009

See all articles by Kevin Q. Wang

Kevin Q. Wang

University of Toronto - Joseph L. Rotman School of Management

Date Written: February 9, 2009

Abstract

In this paper we propose three nonparametric methods for testing conditional mean-variance efficiency of a benchmark portfolio. These approaches avoid functional form misspecification and share a pleasant feature that the test statistics are based on estimators that converge at the fast parametric rate. We derive limiting distributions of the test statistics and compare the three methods in a simulation study. We also present an application of the methods to testing the conditional CAPM.

Keywords: Mean-variance efficiency, Nonparametric tests, Conditional CAPM, Portfolio choice, Nonparametric discount factor

JEL Classification: C12, C14, G11, G12

Suggested Citation

Wang, Kevin Q., Nonparametric Tests of Conditional Mean-Variance Efficiency of a Benchmark Portfolio (February 9, 2009). Journal of Empirical Finance, Vol. 9, 2002, Available at SSRN: https://ssrn.com/abstract=1340025

Kevin Q. Wang (Contact Author)

University of Toronto - Joseph L. Rotman School of Management ( email )

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