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Deutsche Bundesbank, Forschungszentrum >
Discussion Paper Series 2: Banking and Financial Studies, Bundesbank >
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http://hdl.handle.net/10419/27684
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| Title: | | Dominating estimators for the global minimum variance portfolio  |
| Authors: | | Frahm, Gabriel Memmel, Christoph |
| Issue Date: | | 2009 |
| Series/Report no.: | | Discussion Paper Series 2: Banking and financial studies 2009,01 |
| Abstract: | | Two shrinkage estimators for the global minimum variance portfolio that dominate the traditional estimator with respect to the out-of-sample variance of the portfolio return are derived. The presented results hold for any number of observations n >= d 2 and number of assets d >= 4. The small-sample properties of the shrinkage estimators and also their large-sample properties for fixed d but n -> infinity as well as n,d -> infinity but n/d -> q <= infinity are investigated. Further, a small-sample test for the question whether it is better to completely ignore time series information in favor of naive diversification is presented. |
| Subjects: | | Covariance matrix estimation global minimum variance portfolio James-Stein estimation naive diversification shrinkage estimator |
| JEL: | | C13 G11 |
| ISBN: | | 978-3-86558-490-8 |
| Appears in Collections: | | Discussion Paper Series 2: Banking and Financial Studies, Bundesbank
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