Dominating estimators for theglobal minimum variance portfolio

The minimisation of the return variance is one of the classical topics of portfolio theory. One of the main difficulties of variance minimisation is the neccessary input factors- variances and covariances- of the assets of the investment universe- are unknown. Often these variances and covariances are estimated from time series and one incorporates these estimates into the optimisation as if they were the true parameters (traditional approach).[...]

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Year of publication:	2009-02-20
Authors:	Frahm, Gabriel ; Memmel, Christoph
Institutions:	Volkswirtschaftliches Forschungszentrum <Frankfurt, Main>
Subject:	Portfolio Selection \| Diversifikation \| Diversification gains \| Minimum-Varianz-Portfolio \| Stein-Schätzung

1. Introduction
2. Preliminaries
2.1. Notation and Assumptions
2.2. Important Theorems
2.3. Out-of-Sample Variance
3. The Dominant Estimator
3.1. Small-Sample Properties
3.2. Large-Sample Properties
3.3. The Link to Covariance Matrix Estimation
4. Naive Diversification vs. Portfolio Optimization
4.1. A Small-Sample Simulation Study
4.2.Testing the Naive Diversification Hypothesis
5. Conclusion

Persistent link: https://www.econbiz.de/10005866279