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Covariance estimation: do new methods outperform old ones?

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  • Lan Liu
  • Hao Lin

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  • Lan Liu & Hao Lin, 2010. "Covariance estimation: do new methods outperform old ones?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 34(2), pages 187-195, April.
    • Handle: RePEc:spr:jecfin:v:34:y:2010:i:2:p:187-195
    DOI: 10.1007/s12197-009-9104-4
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    References listed on IDEAS

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    1. William F. Sharpe, 1963. "A Simplified Model for Portfolio Analysis," Management Science, INFORMS, vol. 9(2), pages 277-293, January.
    2. Sharpe, William F., 1967. "Portfolio Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 2(2), pages 76-84, June.
    3. Laurent Laloux & Pierre Cizeau & Jean-Philippe Bouchaud & Marc Potters, 1998. "Noise dressing of financial correlation matrices," Science & Finance (CFM) working paper archive 500051, Science & Finance, Capital Fund Management.
    4. Louis K.C. Chan & Jason Karceski & Josef Lakonishok, 1999. "On Portfolio Optimization: Forecasting Covariances and Choosing the Risk Model," NBER Working Papers 7039, National Bureau of Economic Research, Inc.
    5. Pafka, Szilárd & Kondor, Imre, 2004. "Estimated correlation matrices and portfolio optimization," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 343(C), pages 623-634.
    6. Ravi Jagannathan & Tongshu Ma, 2003. "Risk Reduction in Large Portfolios: Why Imposing the Wrong Constraints Helps," Journal of Finance, American Finance Association, vol. 58(4), pages 1651-1683, August.
    7. Roll, Richard & Ross, Stephen A, 1980. "An Empirical Investigation of the Arbitrage Pricing Theory," Journal of Finance, American Finance Association, vol. 35(5), pages 1073-1103, December.
    8. Pafka, Szilárd & Kondor, Imre, 2003. "Noisy covariance matrices and portfolio optimization II," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 319(C), pages 487-494.
    9. Edwin J. Elton & Martin J. Gruber & Jonathan Spitzer, 2006. "Improved Estimates of Correlation Coefficients and their Impact on Optimum Portfolios," European Financial Management, European Financial Management Association, vol. 12(3), pages 303-318, June.
    10. Eun, Cheol S. & Resnick, Bruce G., 1992. "Forecasting the correlation structure of share prices: A test of new models," Journal of Banking & Finance, Elsevier, vol. 16(3), pages 643-656, June.
    11. Ravi Jagannathan & Tongshu Ma, 2003. "Risk Reduction in Large Portfolios: Why Imposing the Wrong Constraints Helps," Journal of Finance, American Finance Association, vol. 58(4), pages 1651-1684, August.
    12. Laurent Laloux & Pierre Cizeau & Jean-Philippe Bouchaud & Marc Potters, 1999. "Random matrix theory and financial correlations," Science & Finance (CFM) working paper archive 500053, Science & Finance, Capital Fund Management.
    13. Chan, Louis K C & Karceski, Jason & Lakonishok, Josef, 1999. "On Portfolio Optimization: Forecasting Covariances and Choosing the Risk Model," Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 937-974.
    14. Kalman J. Cohen & Jerry A. Pogue, 1967. "An Empirical Evaluation of Alternative Portfolio-Selection Models," The Journal of Business, University of Chicago Press, vol. 40, pages 166-166.
    15. Blume, Marshall E, 1971. "On the Assessment of Risk," Journal of Finance, American Finance Association, vol. 26(1), pages 1-10, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Muhammad Husnain & Arshad Hassan & Eric Lamarque, 2016. "Shrinking the Variance-Covariance Matrix: Simpler is Better," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 21(1), pages 1-21, Jan-June.

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    More about this item

    Keywords

    Covariance Estimation; Model Evaluation; Portfolio Management; G11; C13; C51; C52;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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