I'm trying my hand at this problem.
I have two portfolios created with different strategies and different samples of the same investment universe. How can I determine if performance differences are statistically significant? I have several tests available to evaluate efficient frontier with ex-ante data (Spanning test; or Gibbons, Ross, and Shanken (1989) - those I prefer).
My problem is the evaluation of ex-post performance.
Can I still use Gibbons, Ross, and Shanken (1989)?
A simple test of difference in the means (t-statistics)?
Thanks to everyone who can help me, thanks for your time.
Hi Alberto,
Yes, you can still use the Gibbons, Ross, and Shanken test for determining the ex-ante efficiency of a portfolio. Regression based mean - variance spanning test (GMM test) can also be used. However, assuming that your portfolio has no riskless asset, you may use Zhou's eigenvalue test for portfolio efficiency. It gives easily interpretable results about the efficiency of alternate portfolios. Hope it helps.
Dear Alberto,
Please refer to one of my latest coauthored papers published in an A* ranked journal, European Journal of Operational Research (Attached Within):
Al Janabi, Mazin A. M., Arreola Hernandez, Jose, Berger, Theo, Khuong Nguyen, Duc, “Multivariate Dependence and Portfolio Optimization Algorithms under Illiquid Market Conditions”, European Journal of Operational Research, Vol. 259, No. 3, pp. 1121-1131, 2017. [Publisher: Elsevier, Inc.]
I hope it is useful!
Best Regards
Prof. Dr. Mazin A. M. Al Janabi
Full Professor of Finance & Banking and Financial Engineering
Tecnologico de Monterrey, EGADE Business School,
Santa Fe Campus, Mexico City, Mexico.
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