We investigate the effects of constraining leverage and shrinking covariance matrix in constructing large portfolios, both theoretically and empirically. Considering a wide variety of setups that involve conditioning or not conditioning the covariance matrix estimator on the recent past...

We investigate the effects of constraining leverage and shrinking covariance matrix in constructing large portfolios, both theoretically and empirically. Considering a wide variety of setups that involve conditioning or not conditioning the covariance matrix estimator on the recent past...

Two basic solutions have been proposed to fix the well-documented incompatibility of the sample covariance matrix with Markowitz mean-variance portfolio optimization: first, restrict leverage so much that no short sales are allowed; or, second, linearly shrink the sample covariance matrix towards...

This study examines the reaction of firms to economic policy uncertainty (EPU) by investing in corporate social responsibility (CSR). Using a Chinese sample, we find a positive and significant relationship between EPU and the CSR engagement of firms. Moreover, we find that firms without...

We examine how economic policy uncertainty (EPU) impacts on Chinese firm's trade credit. We find a significant negative relationship between EPU and both firm's account payable (receiving) and account receivable (offering). These results were more pronounced for non-state-owned enterprises,...