Testing for Zero Intercept in Multivariate Normal Regression Using the Univariate Multiple-Regression F Test

A likelihood ratio test is derived for comparing the performance potential of a subset of a population of financial assets to the performance potential of the entire population. The test is shown to be equivalent to a test for zero intercept in a multivariate normal regression model. Rao's F ap...

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Bibliographic Details
Published in:The American statistician 1982-11, Vol.36 (4), p.368-371
Main Author: Jobson, J. D.
Format: Article
Language:English
Subjects:
Approximation
Financial portfolio performance
Financial portfolios
Likelihood ratio test
Linear regression
Market efficiency
Matrices
Maximum likelihood estimators
Portfolio performance
Rao's F approximation to Wilks' Lambda
Ratio test
Regression analysis
Stock exchanges
Stock market indices
The Teacher's Corner
Citations: Items that this one cites
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Description
Summary:A likelihood ratio test is derived for comparing the performance potential of a subset of a population of financial assets to the performance potential of the entire population. The test is shown to be equivalent to a test for zero intercept in a multivariate normal regression model. Rao's F approximation to Wilks' Lamda is shown to be equivalent in this case to the conventional F test used to test the significance of a subset of regressors in a univariate multiple-regression model. The test is illustrated using a sample of returns from ten stocks from the New York Stock Exchange.
ISSN:0003-1305
1537-2731
DOI:10.1080/00031305.1982.10483051