TY  - JOUR
AU  - Kandel,Shmuel
AU  - McCulloch,Robert
AU  - Stambaugh,Robert F.
TI  - Bayesian Inference and Portfolio Efficiency
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 134
PY  - 1993
Y2  - May 1993
UR  - http://www.nber.org/papers/t0134
L1  - http://www.nber.org/papers/t0134.pdf
N1  - Author contact info:
Robert F. Stambaugh
Finance Department
The Wharton School
University of Pennsylvania
Philadelphia, PA   19104-6367
Tel: 215/898-5734
Fax: 215/898-6200
E-Mail: stambaugh@wharton.upenn.edu
AB  - 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 justified only after an analysis using informative priors. Including a riskless asset significantly reduces any sample's ability to produce posterior distributions supporting small degrees of inefficiency.
ER  -