We derive empirical tests for the mean-variance efficiency of a given portfolio. The tests can be computed using straightforward linear programming, and they give substantial flexibility in modeling the investment possibilities. Using this test, we can reject the hypothesis that the S&P 500 index is mean-variance efficient relative to the 25 Fama and French (1993) equity portfolios.

linear programming, mean-variance analysis, portfolio selection and evaluation, quadratic programming
Bayesian Analysis (jel C11), Mathematical Methods and Programming: General (jel C60), Corporate Finance and Governance (jel G3), Business Administration and Business Economics; Marketing; Accounting (jel M)
Erasmus Research Institute of Management
ERIM Report Series Research in Management
Copyright 2001, G.T. post, This report in the ERIM Report Series Research in Management is intended as a means to communicate the results of recent research to academic colleagues and other interested parties. All reports are considered as preliminary and subject to possibly major revisions. This applies equally to opinions expressed, theories developed, and data used. Therefore, comments and suggestions are welcome and should be directed to the authors.
Erasmus Research Institute of Management

Post, G.T. (2001). LP Tests for MV Efficiency (No. ERS-2001-66-F&A). ERIM Report Series Research in Management. Erasmus Research Institute of Management. Retrieved from http://hdl.handle.net/1765/130