Universität zu Köln

Frahm, Gabriel and Memmel, Christoph ORCID: 0000-0001-7418-9457 (2010). Dominating estimators for minimum-variance portfolios. J. Econom., 159 (2). S. 289 - 303. LAUSANNE: ELSEVIER SCIENCE SA. ISSN 0304-4076

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Abstract

In this paper, we derive two shrinkage estimators for minimum-variance portfolios 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 assets d >= 4 and number of observations n >= d + 2. The small-sample properties of the shrinkage estimators as well as their large-sample properties for fixed d but n -> infinity and n, d -> infinity but n/d -> q <= infinity 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. (C) 2010 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Frahm, Gabriel UNSPECIFIED UNSPECIFIED UNSPECIFIED Memmel, Christoph UNSPECIFIED orcid.org/0000-0001-7418-9457 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-491686
DOI:	10.1016/j.jeconom.2010.07.007
Journal or Publication Title:	J. Econom.
Volume:	159
Number:	2
Page Range:	S. 289 - 303
Date:	2010
Publisher:	ELSEVIER SCIENCE SA
Place of Publication:	LAUSANNE
ISSN:	0304-4076
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language STEIN ESTIMATION; EXPECTED RETURN; SELECTION; RISK; MARKET; MODEL; COVARIANCES; UNCERTAINTY; PARAMETER; CHOICE Multiple languages Economics; Mathematics, Interdisciplinary Applications; Social Sciences, Mathematical Methods Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/49168