Paper #1101

Título:

Spanning tests in return and stochastic discount factor mean-variance frontiers: A unifying approach

Autores:

Francisco Peñaranda y Enrique Sentana

Data:

Junio 2008

Resumen:

We propose new spanning tests that assess if the initial and additional assets share the economically meaningful cost and mean representing portfolios. We prove their asymptotic equivalence to existing tests under local alternatives. We also show that unlike two-step or iterated procedures, single-step methods such as continuously updated GMM yield numerically identical overidentifyng restrictions tests, so there is arguably a single spanning test. To prove these results, we extend optimal GMM inference to deal with singularities in the long run second moment matrix of the influence functions. Finally, we test for spanning using size and book-to-market sorted US stock portfolios.

Palabras clave:

Asset Pricing, Continuously Updated GMM, Generalised Empirical Likelihood, Generalised Inverse, Representing Portfolios, Singular Covariance Matrix

Códigos JEL:

G11, G12, C12, C13

Área de investigación:

Finanzas y Contabilidad

Publicado en:

Journal of Econometrics, forthcoming

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