Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/44946 
Year of Publication: 
2008
Series/Report no.: 
Discussion Papers in Statistics and Econometrics No. 2/08
Publisher: 
University of Cologne, Seminar of Economic and Social Statistics, Cologne
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

Files in This Item:
File
Size
324.61 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.