Levy and Roll (Review of Financial Studies, 2010) recently revived the debate related to the market portfolio's efficiency, suggesting that it may be mean-variance efficient after all. This paper develops an alternative test of portfolio mean-variance efficiency based on the realistic assumption that all assets are risky. The test is based on the vertical distance of a portfolio from the efficient frontier. Monte Carlo simulations show that our test outperforms the previous mean-variance

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... ncy tests for large samples since it produces smaller size distortions for comparable power. Our empirical application to the U.S. equity market highlights that the market portfolio is not mean-variance efficient, and so invalidates the zerobeta CAPM.