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On the diversification of portfolios of risky assets

Frahm, Gabriel; Wiechers, Christof - 2011

We introduce a measure of diversification for portfolios comprising d risky assets. This measure relates the smallest … of diversification is provided, and the shortcomings of some of these approaches are illustrated. A categorization of … history spanning the last five decades. When measuring the diversification of naively allocated 40-asset portfolios, the …

Persistent link: https://www.econbiz.de/10008939082

Nonlinear Shrinkage of the Covariance Matrix for Portfolio Selection : Markowitz Meets Goldilocks

Ledoit, Olivier - 2017

Markowitz (1952) portfolio selection requires an estimator of the covariance matrix of returns. To address this problem, we promote a nonlinear shrinkage estimator that is more flexible than previous linear shrinkage estimators and has just the right number of free parameters (that is, the...

Persistent link: https://www.econbiz.de/10012973579

Large dynamic covariance matrices: enhancements based on intraday data

De Nard, Gianluca; Engle, Robert F.; Ledoit, Olivier; … - 2022 - This version: January 2022

Multivariate GARCH models do not perform well in large dimensions due to the so-called curse of dimensionality. The recent DCC-NL model of Engle et al. (2019) is able to overcome this curse via nonlinear shrinkage estimation of the unconditional correlation matrix. In this paper, we show how...

Persistent link: https://www.econbiz.de/10013040932

Statistical Inferences for Realized Portfolio Weights

Golosnoy, Vasyl - 2018

Statistical inferences for weights of the global minimum variance portfolio (GMVP) are of both theoretical and practical relevance for mean-variance portfolio selection. Daily realized GMVP weights depend only on realized covariance matrix computed from intraday highfrequency returns. In this...

Persistent link: https://www.econbiz.de/10012912220

Portfolio Choice in the Presence of Estimation Error : A Pricing Model Filter Approach

Lozano, Martin - 2014

diversification effect by reducing the estimation error of the sample estimators. Traditional alternatives aimed to address the … cannot enhance the diversification potential since they tend to mimic (not to outperform) the suboptimal constant rule …

Persistent link: https://www.econbiz.de/10013049595

High-Dimensional Minimum Variance Portfolio Estimation Based on High-Frequency Data

Cai, Tony - 2019

This paper studies the estimation of high-dimensional minimum variance portfolio (MVP) based on the high frequency returns which can exhibit heteroscedasticity and possibly be contaminated by microstructure noise. Under certain sparsity assumptions on the precision matrix, we propose estimators...

Persistent link: https://www.econbiz.de/10012900204

Sparse spanning portfolios and under-diversification with second-order stochastic dominance

Arvanitis, Stelios - 2025

whether spanning holds or not. From large equity datasets, we estimate the expected utility loss due to possible under-diversification …

Persistent link: https://www.econbiz.de/10015194210

Factor models for portfolio selection in large dimensions : the good, the better and the ugly

De Nard, Gianluca; Ledoit, Olivier; Wolf, Michael - 2018 - This version: December 2018

This paper injects factor structure into the estimation of time-varying, large-dimensional covariance matrices of stock returns. Existing factor models struggle to model the covariance matrix of residuals in the presence of time-varying conditional heteroskedasticity in large universes....

Persistent link: https://www.econbiz.de/10011868115

Large dynamic covariance matrices

Engle, Robert F.; Ledoit, Olivier; Wolf, Michael - 2016

Second moments of asset returns are important for risk management and portfolio selection. The problem of estimating second moments can be approached from two angles: time series and the cross-section. In time series, the key is to account for conditional heteroskedasticity; a favored model is...

Persistent link: https://www.econbiz.de/10011518597

Nonlinear shrinkage of the covariance matrix for portfolio selection : Markowitz meets Goldilocks

Ledoit, Olivier; Wolf, Michael - 2017 - Revised version

Persistent link: https://www.econbiz.de/10011598583