Random matrix theory filters in portfolio optimisation: A stability and risk assessment

Random matrix theory (RMT) filters, applied to covariance matrices of financial returns, have recently been shown to offer improvements to the optimisation of stock portfolios. This paper studies the effect of three RMT filters on the realised portfolio risk, and on the stability of the filtered covariance matrix, using bootstrap analysis and out-of-sample testing.

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Year of publication:	2008
Authors:	Daly, J. ; Crane, M. ; Ruskin, H.J.
Published in:	Physica A: Statistical Mechanics and its Applications. - Elsevier, ISSN 0378-4371. - Vol. 387.2008, 16, p. 4248-4260
Publisher:	Elsevier
Subject:	Random matrix theory \| Portfolio optimisation \| Econophysics

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010589903