Portfolio Inefficiency and the Cross-Section of Expected Returns

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dc.contributor.authorKandel, Shmuel
dc.contributor.authorStambaugh, Robert F
dc.date2023-05-17T14:40:19.000
dc.date.accessioned2023-05-22T19:15:58Z
dc.date.available2023-05-22T19:15:58Z
dc.date.issued1995
dc.date.submitted2016-06-15T10:45:20-07:00
dc.description.abstractThe Capital Asset Pricing Model implies that (i) the market portfolio is efficient and (ii) expected returns are linearly related to betas. Many do not view these implications as separate, since either implies the other, but we demonstrate that either can hold nearly perfectly while the other fails grossly. If the index portfolio is inefficient, then the coefficients and from an ordinary least squares regression of expected returns on betas can equal essentially any values and bear no relation to the index portfolio's mean-variance location. That location does determine the outcome of a mean-beta regression fitted by generalized least squares.
dc.identifier.urihttps://repository.upenn.edu/handle/20.500.14332/34377
dc.legacy.articleid1140
dc.legacy.fields10.1111/j.1540-6261.1995.tb05170.x
dc.legacy.fulltexturlhttps://repository.upenn.edu/cgi/viewcontent.cgi?article=1140&context=fnce_papers&unstamped=1
dc.rightsThis is the peer reviewed version of the following article, which has been published in final form at http://dx.doi.org/10.1111/j.1540-6261.1995.tb05170.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
dc.source.beginpage157
dc.source.endpage184
dc.source.issue280
dc.source.issue1
dc.source.journalFinance Papers
dc.source.journaltitleThe Journal of Finance
dc.source.peerreviewedtrue
dc.source.statuspublished
dc.source.volume50
dc.subject.otherFinance
dc.subject.otherFinance and Financial Management
dc.titlePortfolio Inefficiency and the Cross-Section of Expected Returns
dc.typeArticle
digcom.contributor.authorKandel, Shmuel
digcom.contributor.authorStambaugh, Robert F
digcom.identifierfnce_papers/280
digcom.identifier.contextkey8735377
digcom.identifier.submissionpathfnce_papers/280
digcom.typearticle
dspace.entity.typePublication
upenn.schoolDepartmentCenterFinance Papers
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