Journal of Financial Economics Vol. 13 No. 4 1984
The likelihood ratio test statistic of mean-variance efficiency without a riskless asset
Abstract
The question whether a given porfolio is mean-variance efficient is a basic problem of investment analysis. Mean-variance efficiency is also the basis of the Capital Asset Pricing Model. This paper presents the explicit form of the likelihood ratio test of the hypothesis that a given portfolio, or a particular market index, is ex-ante mean-variance efficient in the case where there is no riskless asset. Geometric relations are illustrated to provide intuition about the constrained maximum likelihood estimators and the test statistic, and two simple economic interpretations of the test are given.
- DOI
- 10.1016/0304-405x(84)90017-5
- Volume
- 13
- Issue
- 4
- Pages
- 575-592
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref