English, Article, Journal or magazine article edition: Spanning Tests in Return and Stochastic Discount Factor Mean-Variance Frontiers: A Unifying Approach Francisco Penaranda; Francisco Peñaranda; Enrique Sentana

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • SPANNING TESTS IN RETURN AND STOCHASTIC DISCOUNT FACTOR MEAN-VARIANCE FRONTIERS: A UNIFYING APPROACH
Author
  • Francisco Penaranda
  • Francisco Peñaranda
  • Enrique Sentana
Physical Description
  • preprint
Notes
  • We propose new spanning tests that assess if the economically meaningful cost and mean representing portfolios are shared by the initial and additional assets. We show that our proposed tests are asymptotically equivalent to existing ones under local alternatives, and analyse their asymptotic relative efficiency. We extend optimal GMM inference to deal with singularities arising in some spanning tests, and show that our tests generalise naturally to situations in which we consider all active portfolio strategies. Finally, we apply our tests to strategies involving size and book-to-market sorted stock portfolios whose weights depend on the state of the credit cycle.
  • Asset Pricing, Asymptotic Slopes, Dynamic Portfolio Strategies, GMM, Representing portfolios, Singular Covariance Matrix
  • RePEc:upf:upfgen:1101
  • We propose new approaches to test for spanning in the return and stochastic discount factor mean-variance frontiers, which assess if either the centred or uncentred mean and cost representing portfolios are shared by the initial and extended sets of assets. We show that our proposed tests are asymptotically equivalent to the existing spanning tests under the null and sequences of local alternatives, and analyse their asymptotic relative e.ciency. We also extend the theory of optimal GMM inference to deal with the singularities that arise in some spanning tests. Finally, we include an empirical application to money markets in Europe.
  • RePEc:fmg:fmgdps:dp497
  • We propose new approaches to test for spanning in the return and stochastic discount factor mean-variance frontiers, which assess if either the centred or uncentred mean and cost representing portfolios are shared by the initial and extended sets of assets. We show that our proposed tests are asymptotically equivalent to the existing spanning tests under the null and sequences of local alternatives, and analyse their asymptotic relative efficiency. We also extend the theory of optimal GMM inference to deal with the singularities that arise in some spanning tests. Finally, we include an empirical application to money markets in Europe.
  • RePEc:cmf:wpaper:wp2004_0410
Language
  • English
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