Huberman is from the University of Chicago and Tel Aviv University; Kandel is from the University of Chicago. An earlier version of this paper was titled “Likelihood Ratio Tests of Asset Pricing and Mutual Fund Separation”. We are grateful to Eugene Fama, Wayne Ferson, Jon Ingersoll, Steve Ross, Robert Stambaugh, an anonymous referee, and especially Nai-fu Chen for useful conversations and comments and to the University of Chicago's Center for Research in Security Prices for financial support.
Article first published online: 30 APR 2012
1987 The American Finance Association
The Journal of Finance
Volume 42, Issue 4, pages 873–888, September 1987
How to Cite
HUBERMAN, G. and KANDEL, S. (1987), Mean-Variance Spanning. The Journal of Finance, 42: 873–888. doi: 10.1111/j.1540-6261.1987.tb03917.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
The authors propose a likelihood-ratio test of the hypothesis that the minimum-variance frontier of a set of K assets coincides with the frontier of this set and another set of N assets. They study the relation between this hypothesis, exact arbitrage pricing, and mutual fund separation. The exact distribution of the test statistic is available. The authors test the hypothesis that the frontier spanned by three size-sorted stock portfolios is the same as the frontier spanned by thirty-three size-sorted stock portfolios.