Joint Estimation of Conditional Mean and Covariance for Unbalanced Panels

Damir Filipović and Paul Schneider
Additional contact information
Damir Filipović: École Polytechnique Fédérale de Lausanne; Swiss Finance Institute
Paul Schneider: University of Lugano - Institute of Finance; Swiss Finance Institute

No 24-60, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We propose a novel nonparametric kernel-based estimator of cross-sectional conditional mean and covariance matrices for large unbalanced panels. We show its consistency and provide finite-sample guarantees. In an empirical application, we estimate conditional mean and covariance matrices for a large unbalanced panel of monthly stock excess returns given macroeconomic and firm-specific covariates from 1962 to 2021. The estimator performs well with respect to statistical measures. It is informative for empirical asset pricing, generating conditional mean-variance efficient portfolios with substantial outof-sample Sharpe ratios far beyond equal-weighted benchmarks.

Pages: 42 pages
Date: 2024-11
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5006799 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2460

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().