Robust dependence modeling for high-dimensional covariance matrices with financial applications

  title={Robust dependence modeling for high-dimensional covariance matrices with financial applications},
  author={Zhe Zhu and R. Welsch},
  journal={The Annals of Applied Statistics},
  • Zhe Zhu, R. Welsch
  • Published 2018
  • Computer Science
  • The Annals of Applied Statistics
A very important problem in finance is the construction of portfolios of assets that balance risk and reward in an optimal way. A critical issue in portfolio development is how to address data outliers that reflect very unusual, generally non-recurring, market conditions. Should we allow these to have a significant impact on our estimation and portfolio construction process or should they be considered separately as evidence of a regime shift and/or be used to adjust baseline results? In… Expand
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