Dominating estimators for minimum-variance portfolios

Gabriel Frahm and Christoph Memmel

Journal of Econometrics, 2010, vol. 159, issue 2, 289-302

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

Keywords: Covariance; matrix; estimation; Minimum-variance; portfolio; Stein; estimation; Naive; diversification; Shrinkage; estimator (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (72)

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Related works:
Working Paper: Dominating Estimators for Minimum-Variance Portfolios (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:159:y:2010:i:2:p:289-302

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