A Monte Carlo synthetic sample based performance evaluation method for covariance matrix estimators

Jin Yuan and Xianghui Yuan

Applied Economics Letters, 2021, vol. 28, issue 2, 124-128

Abstract: The evaluation of covariance matrix estimators is very important for portfolio analysis and risk management. The Monte Carlo synthetic sample based performance evaluation method proposed by this article can avoid the main shortcomings of statistical and economic methods which are widely used in the existing literature. The proposed method does not need the true covariance and does not need to introduce the performance of the out-of-sample portfolios. It is an intuitive, effective and robust measure for both simulation and empirical analysis.

Date: 2021
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DOI: 10.1080/13504851.2020.1738322

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