### Abstract

Language | English |
---|---|

Number of pages | 46 |

Journal | Advances in Investment Analysis and Portfolio Management |

Publication status | Accepted/In press - 21 Aug 2017 |

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### Keywords

- mean-variance efficiency
- portfolio constraints
- Bayesian analysis
- factor models

### Cite this

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**Can short selling constraints explain the portfolio inefficiency of U.K. benchmark models?** / Fletcher, Jonathan.

Research output: Contribution to journal › Article

TY - JOUR

T1 - Can short selling constraints explain the portfolio inefficiency of U.K. benchmark models?

AU - Fletcher, Jonathan

PY - 2017/8/21

Y1 - 2017/8/21

N2 - This study uses the Bayesian approach of Wang(1998) to examine the impact of no short selling constraints on the mean-variance inefficiency of linear factor models in U.K. stock returns and to conduct model comparison tests between the models. No short selling constraints lead to a substantial reduction in the mean-variance inefficiency of all factor models and eliminate the mean-variance inefficiency of some factor models in states when the lagged one-month U.K. Treasury Bill return is higher than normal. In model comparison tests, the best performing model is a six-factor model of Fama and French(2017a), which uses the small ends of the value, profitability, investment, and momentum factors.

AB - This study uses the Bayesian approach of Wang(1998) to examine the impact of no short selling constraints on the mean-variance inefficiency of linear factor models in U.K. stock returns and to conduct model comparison tests between the models. No short selling constraints lead to a substantial reduction in the mean-variance inefficiency of all factor models and eliminate the mean-variance inefficiency of some factor models in states when the lagged one-month U.K. Treasury Bill return is higher than normal. In model comparison tests, the best performing model is a six-factor model of Fama and French(2017a), which uses the small ends of the value, profitability, investment, and momentum factors.

KW - mean-variance efficiency

KW - portfolio constraints

KW - Bayesian analysis

KW - factor models

UR - https://doi.org/10.6291/AIAPM

M3 - Article

JO - Advances in Investment Analysis and Portfolio Management

T2 - Advances in Investment Analysis and Portfolio Management

JF - Advances in Investment Analysis and Portfolio Management

ER -