• Corpus ID: 204972735

Find what you are looking for: A data-driven covariance matrix estimation

@article{Husmann2019FindWY,
  title={Find what you are looking for: A data-driven covariance matrix estimation},
  author={Sven Husmann and Antoniya Shivarova and Rick Steinert},
  journal={arXiv: Portfolio Management},
  year={2019}
}
The global minimum-variance portfolio is a typical choice for investors because of its simplicity and broad applicability. Although it requires only one input, namely the covariance matrix of asset returns, estimating the optimal solution remains a challenge. In the presence of high-dimensionality in the data, the sample estimator becomes ill-conditioned, which negates the positive effect of diversification in an out-of-sample setting. To address this issue, we review recent covariance matrix… 

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