We show that unconditionally efficient returns do not achieve the maximum unconditional
Sharpe ratio, neither display zero unconditional Jensen s alphas, when returns are
predictable. Next, we define a new type of efficient returns that is characterized by those
unconditional properties. We also study a different type of efficient returns that is rationalized
by standard mean-variance preferences and motivates new Sharpe ratios and Jensen s
alphas. We revisit the testable implications of asset pricing ...
We show that unconditionally efficient returns do not achieve the maximum unconditional
Sharpe ratio, neither display zero unconditional Jensen s alphas, when returns are
predictable. Next, we define a new type of efficient returns that is characterized by those
unconditional properties. We also study a different type of efficient returns that is rationalized
by standard mean-variance preferences and motivates new Sharpe ratios and Jensen s
alphas. We revisit the testable implications of asset pricing models from the perspective of
the three sets of efficient returns. We also revisit the empirical evidence on the conditional
variants of the CAPM and the Fama-French model from a portfolio perspective.
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