2025-03-262025-03-2620152017-03-15https://pyxida.aueb.gr/handle/123456789/6528This study develops and implements methods for analyzing whether introducing new securities or relaxing investment constraints improves the investment opportunity set for risk averse investors. We develop a statistical test procedure for ‘stochastic spanning’ for two nested polyhedral portfolio sets based on subsampling and Linear Programming. The test is statistically consistent and asymptotically exact for a class of weakly dependent processes. Using this test, we accept market portfolio efficiency but reject two-fund separation in standard data sets of historical stock market returns. The divergence between the test results for the two hypotheses illustrates the role for higher-order moment risk in portfolio choice and challenges representative-investor models of capital market equilibrium.30 pagesCC BY: Attribution alone 4.0https://creativecommons.org/licenses/by/4.0/portfolio choicestochastic dominancespanninglinear programmingasset pricingText