GRS.test (version 1.0)

GRS.Power: Statistical Power of the GRS test

Description

Calculates the power of the GRS test with density functions under H0 and H1

Usage

GRS.Power(T, N, K, theta, ratio, alpha = 0.05, xmax = 10, Graph = "TRUE")

Arguments

T

sample size

N

the number of portfolio returns

K

the number of risk factors

theta

maximum Sharpe ratio of the K factor portfolios

ratio

theta/thetas, proportion of the potential efficiency

alpha

the level of significance, default is 0.05

xmax

the support of the desnity is from 0 to xmax. default is 10

Graph

show graph if TRUE. No graph otherwise

Value

Details

Calculate the power following GRS (1989)

The distribution under H1 is based on the value of theta and ratio

Under H0: ratio = 1; under H1: ratio < 1

References

Gibbons, Ross, Shanken, 1989. A test of the efficiency of a given portfolio, Econometrica, 57,1121-1152.

See Also

GRS(1989)

Examples

GRS.Power(T=120, N=25, K=3, theta=0.3, ratio=0.5)  # Figure 1 of Kim and Shamsuddin (2016)