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Can risk-free and zero-beta portfolios be constructed? UK and US Evidence
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Date
2025-03-29
Authors
He, Zhen
O'Connor, Fergal
Thijssen, Jacco
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier B.V.
Published Version
Abstract
This paper determines whether a risk-free portfolio can be formed using gold, T-bills, silver, platinum, and palladium. We construct zero-variance portfolios composed of two assets showing that it is possible to construct risk-free portfolios based on zero variance. We apply Wald tests to Black's zero-beta CAPM to examine whether these constructed risk-free portfolios qualify as zero-beta portfolios. We find that a risk-free portfolio is not always a zero-beta portfolio. Results show that a risk-free portfolio and a zero-beta portfolio in one market is not necessarily so in another.
Description
Keywords
Risk-free portfolio , Precious metals , Wald test , Zero-beta CAPM
Citation
He, Z., O'Connor, F. and Thijssen, J. (2025) 'Can risk-free and zero-beta portfolios be constructed? UK and US Evidence', Economics Letters, 250, 112308 (4pp). https://doi.org/10.1016/j.econlet.2025.112308