Dominating estimators for minimum-variance portfolios
AbstractIn this paper, we derive two shrinkage estimators for minimum-variance portfolios that dominate the traditional estimator with respect to the out-of-sample variance of the portfolio return. The presented results hold for any number of assets d>=4 and number of observations n>=d+2. The small-sample properties of the shrinkage estimators as well as their large-sample properties for fixed d but n-->[infinity] and n,d-->[infinity] but n/d-->q
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Econometrics.
Volume (Year): 159 (2010)
Issue (Month): 2 (December)
Contact details of provider:
Web page: http://www.elsevier.com/locate/jeconom
Covariance matrix estimation Minimum-variance portfolio Stein estimation Naive diversification Shrinkage estimator;
Other versions of this item:
- Gabriel Frahm & Christoph Memmel, 2010. "Dominating Estimators for Minimum-Variance Portfolios," Post-Print peer-00741629, HAL.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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