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| Author: | Kandel, S. McCulloch, R. Stambaugh, R. |
| Title: | Bayesian inference and portfolio efficiency |
| Journal: | Review of Financial Studies
1995 : SPRING, VOL. 8:1, p. 1-54 |
| Index terms: | EFFICIENCY FINANCE BAYESIAN STATISTICS |
| Language: | eng |
| Abstract: | A Bayesian approach is used to investigate a sample's information about a portfolio's degree of inefficiency. With standard diffuse priors, posterior distributions for measures of portfolio inefficiency can concentrate well away from values consistent with efficiency, even when the portfolio is exactly efficient in the sample. The data indicate that the NYSE-AMEX market portfolio is rather inefficient in the presence of a riskless asset, although this conclusion is only justified after an analysis using informative priors. |
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