A Bayesian approach is used to investigate a sample's information about a portfolio's degree of inefficiency. With standard diffuse priors, posterior distributions for measures of portfolio inefficiency can concentrate well away from values consistent with efficiency, even when the portfolio is...

When all financial assets have risky returns, the mean-variance portfolio model is potentially subject to two types of bliss points. One bliss point arises when a von Neumann-Morgenstern utility function displays negative marginal utility for sufficiently large end-of-period wealth, such as in...

This paper develops behavioral relationships explaining investors' demands for long-term bonds, using three alternative hypotheses about investors' expectations of future bond prices (yields). The results, based on U.S. 'data for six major categories of bond market investors, consistently...

We argue that active management's popularity is not puzzling despite the industry's poor track record. Our explanation features decreasing returns to scale: As the industry's size increases, every manager's ability to outperform passive benchmarks declines. The poor track record occurred before...

A plot of expected returns versus betas obeys virtually no relation to an inefficient index portfolio's mean-variance location. If the index portfolio is inefficient, then the coefficients and R- squared from an ordinary-least-squares regression of expected returns on betas can equal essentially...