Golosnoy, Vasyl, Gribisch, Bastian and Seifert, Miriam Isabel (2019). Exponential smoothing of realized portfolio weights. J. Empir. Financ., 53. S. 222 - 238. AMSTERDAM: ELSEVIER. ISSN 1879-1727

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Abstract

The model-free exponential smoothing (ES) approach is a simple and robust way to make forecasts of random vectors. In this paper we investigate ES predictors for weights of high dimensional realized global minimum variance portfolio (GMVP) which depend only on a realized covariance matrix of financial risky assets. We contrast a direct ES prediction of realized GMVP proportions and an indirect ES forecast, where smoothing is applied to realized covariance matrices and the GMVP composition is computed afterwards. We show analytically that either direct or indirect ES predictors of GMVP proportions could be advantageous but neither of them dominates. For this reason we suggest a dynamic time series approach in order to combine them. We illustrate our findings in an empirical study for GMVPs based on 100 risky assets and report that the proposed ES forecast combination is suitable for GMVP prediction.

Item Type: Journal Article
Creators:
CreatorsEmailORCIDORCID Put Code
Golosnoy, VasylUNSPECIFIEDUNSPECIFIEDUNSPECIFIED
Gribisch, BastianUNSPECIFIEDUNSPECIFIEDUNSPECIFIED
Seifert, Miriam IsabelUNSPECIFIEDUNSPECIFIEDUNSPECIFIED
URN: urn:nbn:de:hbz:38-142518
DOI: 10.1016/j.jempfin.2019.07.006
Journal or Publication Title: J. Empir. Financ.
Volume: 53
Page Range: S. 222 - 238
Date: 2019
Publisher: ELSEVIER
Place of Publication: AMSTERDAM
ISSN: 1879-1727
Language: English
Faculty: Unspecified
Divisions: Unspecified
Subjects: no entry
Uncontrolled Keywords:
KeywordsLanguage
ECONOMETRIC-ANALYSIS; COVARIANCE MATRICES; MODEL; MARKETMultiple languages
Business, Finance; EconomicsMultiple languages
Refereed: Yes
URI: http://kups.ub.uni-koeln.de/id/eprint/14251

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