This paper tests the ex ante efficiency of Australian benchmark portfolios over the period 1980–1996. Indices commonly used as performance evaluation benchmarks were found to be ex ante inefficient when unrestricted short selling was allowed. However, when short selling was restricted, the ex ante efficiency of the benchmarks could not be rejected. Further, the mining/resource and property sectors were not performance-enhancing additions to investment in the industrial sector over the period examined. This has important implications for the performance evaluation of managed investment funds.
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