I propose an exact finite sample test of the risk reduction of the global minimum variance (GMV) portfolio. The GMV test statistic has a straightforward geometric and portfolio interpretation and complements the celebrated GRS test in Gibbons, Ross and Shanken (1989). In practical applications,...

I propose an exact finite sample test of the risk reduction of the global minimum variance (GMV) portfolio. The GMV test statistic is proportional to the reduction in the variance of the GMV portfolio and has a straightforward geometric and portfolio interpretation and complements the celebrated...