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Discussion Papers in Statistics and Econometrics, Seminar für Wirtschafts- und Sozialstatistik, Universität Köln >
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http://hdl.handle.net/10419/44946
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| Title: | | Dominating estimators for the global minimum variance portfolio  |
| Authors: | | Frahm, Gabriel Memmel, Christoph |
| Issue Date: | | 2008 |
| Series/Report no.: | | Discussion papers in statistics and econometrics 2/08 |
| Abstract: | | In this paper, we derive 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. 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 as well as their large-sample properties for fixed d but n → ∞ as well as n/d → ∞ but n/d → q ≤ ∞ are investigated. Furthermore, we present a small-sample test for the question of whether it is better to completely ignore time series information in favor of naive diversification. |
| Subjects: | | Covariance matrix estimation Global minimum variance portfolio James-Stein estimation Naive diversification Shrinkage estimator |
| JEL: | | C13 G11 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion Papers in Statistics and Econometrics, Seminar für Wirtschafts- und Sozialstatistik, Universität Köln
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