Random matrix theory for portfolio optimization : a stability approach

@inproceedings{SShari2015RandomMT,
  title={Random matrix theory for portfolio optimization : a stability approach},
  author={' S.Shari and M. Crane and Atid Shamaie and H. Ruskin},
  year={2015}
}
We apply random matrix theory (RMT) to an empirically measured 'nancial correlation matrix, C, and show that this matrix contains a large amount of noise. In order to determine the sensitivity of the spectral properties of a random matrix to noise, we simulate a set of data and add di4erent volumes of random noise. Having ascertained that the eigenspectrum is independent of the standard deviation of added noise, we use RMT to determine the noise percentage in a correlation matrix based on real… CONTINUE READING