Dominating Estimators for Minimum-Variance Portfolios
Résumé
In 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 and number of observations . The small-sample properties of the shrinkage estimators as well as their large-sample properties for fixed but and but are investigated. Furthermore, we present a small-sample test for the question of whether it is better to completely ignore time series information in favor of naive diversification.
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PEER_stage2_10.1016%2Fj.jeconom.2010.07.007.pdf (550.93 Ko)
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