In this paper, we derive simple, directly computable conditions for minimum-variance portfolios to have all positive weights. We show that either there is no minimum-variance portfolio with all positive weights or there is a single segment of the minimum-variance frontier for which all portfolios have positive weights. Then, we examine the likelihood of observing positively weighted minimum-variance portfolios. Analytical and computational results suggest that: i) even if the mean vector and covariance matrix are compatible with a given positively weighted portfolio being mean-variance efficient, the proportion of the minimum-variance frontier containing positively weighted portfolios is small and decreases as the number of assets in the universe increases, and ii) small perturbations in the means will likely lead to no positively weighted minimum-variance portfolios.

We investigate housing market responses to transaction taxes using administrative data on all property transactions in the U.K. from 2004 to 2012 combined with quasi-experimental variation from tax notches and tax stimulus. We present two main findings. First, transaction taxes are highly distortionary across a range of margins, causing large distortions to the price, volume, and timing of property transactions. Secondly, temporary transaction tax cuts are an enormously effective form of fiscal stimulus. A temporary elimination of a 1% transaction tax increased housing market activity by 20% in the short run (due to both timing and extensive responses) and less than half of the stimulus effect was reversed after the tax was reintroduced (due to re-timing). Because of the complementarities between moving house and consumer spending, these stimulus effects translate into extra spending per dollar of tax cut equal to about 1. We interpret our empirical findings in the context of a housing model with downpayment constraints in which leverage amplifies the effects of transaction taxes.

This paper investigates the sensitivity of mean-variance(MV)-efficient portfolios to changes in the means of individual assets. When only a budget constraint is imposed on the investment problem, the analytical results indicate that an MV-efficient portfolio’s weights, mean, and variance can be extremely sensitive to changes in asset means. When nonnegativity constraints are also imposed on the problem, the computational results confirm that a positively weighted MV-efficient portfolio’s weights are extremely sensitive to changes in asset means, but the portfolio’s returns are not. A surprisingly small increase in the mean of just one asset drives half the securities from the portfolio. Yet the portfolio’s expected return and standard deviation are virtually unchanged.

We show that the set of expected return vectors, for which an observed portfolio is mean variance (MV) efficient, is a two-parameter family. We identify ten ways to specify the time series behavior of the two parameters; the result highlights a number of inconsistencies involved in MV modelling. For each of the cases, it permits the inference of the time series of expected return vectors, as well as all the other Capital Asset Pricing Model (CAPM) variables, compatible with a known covariance matrix and the observed time series of market value weights. The empirical work shows that there are substantial case-to-case differences in the time series of mean vectors and many of them are quite different from the constant mean vector envisioned in tests of the CAPM.

We show that the set of expected return vectors, for which an observed portfolio is mean variance (MV) efficient, is a two‐parameter family. We identify ten ways to specify the time series behavior of the two parameters; the result highlights a number of inconsistencies involved in MV modelling. For each of the cases, it permits the inference of the time series of expected return vectors, as well as all the other Capital Asset Pricing Model (CAPM) variables, compatible with a known covariance matrix and the observed time series of market value weights. The empirical work shows that there are substantial case‐to‐case differences in the time series of mean vectors and many of them are quite different from the constant mean vector envisioned in tests of the CAPM.

Bureaucrats implement policy. How important are they for a state’s productivity? And do the trade-offs between policies depend on their effectiveness? Using data on 16 million public purchases in Russia, we show that 39 percent of the variation in prices paid for narrowly defined items is due to the individual bureaucrats and organizations who manage procurement. Low-price buyers also display higher spending quality. Theory suggests that such differences in effectiveness can be pivotal for policy design. To illustrate, we show that a common one—bid preferences for domestic suppliers—substantially improves procurement performance, but only when implemented by ineffective bureaucrats.