| Article ID: | iaor1992554 |
| Country: | Netherlands |
| Volume: | 46 |
| Issue: | 3 |
| Start Page Number: | 304 |
| End Page Number: | 312 |
| Publication Date: | Jun 1990 |
| Journal: | European Journal of Operational Research |
| Authors: | stermark R. |
| Keywords: | statistics: empirical, time series & forecasting methods |
In this paper a Markovian super criterion is formulated for testing the Portfolio Efficiency of competing Capital Market Theories. The Portfolio Efficiency of the Arbitrage Pricing Theory (APT) and the Capital Asset Pricing Model (CAPM) is tested on Finnish weekly price index data over the 1970-1983 time frame. The efficiency test results imply that the APT dominates the CAPM. A considerable deviation between the expected Pareto-frontier and the best expected frontier according to the APT is observed.