THE MEAN-VARIANCE EFFICIENCY TEXT OF A GIVEN PORTFOLIO : SINGAPORE EVIDENCE

Abstract

The mean-variance efficiency of SES (Stock Exchange of Singapore)-All Shares Index (SES) and Straits Times Industrial Index (STI) are tested in this work. When there is a riskless asset, Gibbons, Ross, and Shanken ( I 989) (GRS) test statistic is used. The monthly and weekly returns are grouped into portfolios according to beta, past return sum and variance, respectively. The efficiency of SES and STI are strongly rejected When there is no riskless rate, the Wald, Q·, QA, Shanken's (1985) Cross-Sectional Regression (CSRT), Likelihood Ratio (LRT) and Lagrange Multiplier (LMT) test statistics are employed. The daily, weekly and monthly returns are grouped into portfolios according to beta, past return sum and variance, respectively. The efficiency of SES and STI cannot be rejected at the ordinary 5% significance level. On the whole, STI is more efficient than SES. Measurement interval effects are also investigated. Generally, the monthly returns are more efficient than the weekly returns and in turn the weekly returns are more efficient than the daily returns..