The Sampling Error in Estimates of Mean‐Variance Efficient Portfolio Weights

  • Author(s): Mark Britten‐Jones
  • Published: Dec 17, 2002
  • Pages: 655-671
  • DOI: 10.1111/0022-1082.00120

This paper presents an exact finite‐sample statistical procedure for testing hypotheses about the weights of mean‐variance efficient portfolios. The estimation and inference procedures on efficient portfolio weights are performed in the same way as for the coefficients in an OLS regression. OLS t‐ and F‐statistics can be used for tests on efficient weights, and when returns are multivariate normal, these statistics have exact t and F distributions in a finite sample. Using 20 years of data on 11 country stock indexes, we find that the sampling error in estimates of the weights of a global efficient portfolio is large.

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