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Working Paper No. 1/2018
Örebro University School of Business, Örebro
In this paper we derive the nite-sample distribution of the esti- mated weights of the tangency portfolio when both the population and the sample covariance matrices are singular. These results are used in the derivation of a statistical test on the weights of the tangency port- folio where the distribution of the test statistic is obtained under both the null and the alternative hypotheses. Moreover, we establish the high-dimensional asymptotic distribution of the estimated weights of the tangency portfolio when both the portfolio dimension and the sam- ple size increase to in nity. The theoretical ndings are implemented in an empirical application dealing with the returns on the stocks included into the S&P 500 index.
tangency portfolio
singular Wishart distribution
singular covariance matrix
high-dimensional asymptotics
hypothesis testing
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Working Paper

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