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Portfolio Inefficiency and the Cross-Section of Expected Returns / Shmuel Kandel, Robert F. Stambaugh.
- Format:
- Book
- Author/Creator:
- Kandel, Shmuel.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w4702.
- NBER working paper series no. w4702
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1994.
- Summary:
- A plot of expected returns versus betas obeys virtually no relation to an inefficient index portfolio's mean-variance location. If the index portfolio is inefficient, then the coefficients and R- squared from an ordinary-least-squares regression of expected returns on betas can equal essentially any desired values. The mean-variance location of the index does determine the properties of a cross- sectional mean-beta relation fitted by generalized least squares (GLS). As the index portfolio moves closer to exact efficiency, the GLS mean-beta relation moves closer to the exact linear relation corresponding to an efficient portfolio with the same variance. The goodness-of-fit for the GLS regression is the index portfolio's squared relative efficiency, which measures closeness to efficiency in mean-variance space.
- Notes:
- Print version record
- April 1994.
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