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Correcting for Heteroscedasticity in Tests for Market Timing Ability
William Breen, Ravi Jagannathan and Aharon R. Ofer
The Journal of Business
Vol. 59, No. 4, Part 1 (Oct., 1986), pp. 585-598
Published by: The University of Chicago Press
Stable URL: http://www.jstor.org/stable/2353010
Page Count: 14
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In this paper we examine the parametric test proposed by Henriksson and Merton for evaluating the market timing ability of portfolio managers. Using simulation techniques we show that correction for heteroscedasticity can significantly affect the conclusions. We find that the heteroscedasticity corrections suggested by Hansen and by White are particularly effective.
The Journal of Business © 1986 The University of Chicago Press