Mean-Variance Efficiency, Aggregate Shocks and Return Horizons.

Using monthly, semi-annual and annual sampling frequencies from February 1974 to June 1996, we reject the mean-variance efficiency of the Australian stock market while supporting the view that conditional variances are not constant in time. Results indicate that unexpected movements in key aggregate factors have added value in explaining industrial sector conditional volatility, particularly at horizons of six months and greater. Copyright 2001 by Blackwell Publishers Ltd and The Victoria University of Manchester