Bayesian inference for the tangent portfolio

David Bauder (), Taras Bodnar (), Stepan Mazur and Yarema Okhrin ()
Additional contact information
David Bauder: Humboldt-University of Berlin, Postal: Humboldt-University of Berlin, Department of Mathematics, D-10099 Berlin, Germany, https://www.hu-berlin.de/en/service/zisneu/zis-en?ifabsessid=ebpp5&ifab_modus=detailansicht&ifab_pid=1688138&zuf=3838666dc21b6ae0036134c23ad1a723
Taras Bodnar: Stockholm University, Postal: Stockholm University, Department of Mathematics, SE - 10691 Stockholm, Sweden, https://www.su.se/english/profiles/tbodn-1.219689
Yarema Okhrin: University of Augsburg, Postal: University of Augsburg, Department of Statistics, D-86159 Augsburg, Germany

No 2018:2, Working Papers from Örebro University, School of Business

Abstract: In this paper we consider the estimation of the weights of tangent portfolios from the Bayesian point of view assuming normal conditional distributions of the logarithmic returns. For di↵use and conjugate priors for the mean vector and the covariance matrix, we derive stochastic representations for the posterior distributions of the weights of tangent portfolio and their linear combinations. Separately we provide the mean and variance of the posterior distributions, which are of key importance for portfolio selection. The analytic results are evaluated within a simulation study, where the precision of coverage intervals is assessed.

Keywords: asset allocation; tangent portfolio; Bayesian analysis (search for similar items in EconPapers)
JEL-codes: C10 C44 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2018-02-01
New Economics Papers: this item is included in nep-ecm and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://www.oru.se/globalassets/oru-sv/institution ... rs2018/wp-2-2018.pdf Full text (application/pdf)

Related works:
Journal Article: BAYESIAN INFERENCE FOR THE TANGENT PORTFOLIO (2018)
Journal Article: BAYESIAN INFERENCE FOR THE TANGENT PORTFOLIO (2018)
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:hhs:oruesi:2018_002

Access Statistics for this paper

More papers in Working Papers from Örebro University, School of Business Örebro University School of Business, SE - 701 82 ÖREBRO, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by ().