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Title:Portfolio performance, residual analysis and capital asset pricing model tests / BEBR No. 539
Author(s):Rice, Edward M.; Mayers, David
Contributor(s):University of Illinois at Urbana-Champaign. College of Commerce and Business Administration
Subject(s):Capital assets pricing model.
Issue Date:Jan 10 197
Publisher:[Urbana, Ill.] : College of Commerce and Business Administration, University of Illinois at Urbana-Champaign,
Series/Report:Faculty working papers ; no. 539
Description:Includes bibliographical references (p. 41-42).
"Recent work by Richard Roll has challenged the worth of portfolio performance measures based on the capital asset pricing model. This paper demonstrates that Roll's conclusions are due to his inappropriate use of a 'truly' ex-ante efficient index. Using a choice and information theoretic framework, an appropriate index is shown to be efficient relative to to the probabilities assessed by the 'market.' Residual analyses and portfolio performance tests, using such an index, yield meaningful results for a wide class of information structures. Roll's primary criticisms, however, relate to tests of the model itself. We argue that these criticisms are vastly overstated."
Rights Information:In copyright. Digitized with permission of the University of Illinois Board of Trustees. Contact for information.
Copyright Jan 10 1979 Board of Trustees University of Illinois.
Date Available in IDEALS:2011-09-15
Has Version(s):
Identifier in Online Catalog:330873
OCLC Identifier:(OCoLC)ocm05235831

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