Questions tagged [covariance-estimation]
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Portfolio Optimization : Shrinkage of Covariance Matrix when data is available
It seems that shrinking the covariance matrix is especially useful if the number of individual stocks is greater than the number of data points. However is there any special gain if you're not ...
- 317
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Shrinkage Estimator for Newey-West Covariance Matrix
I like to apply the Newey-West covariance estimator for portfolio optmization which is given by
$$
\Sigma = \Sigma(0) + \frac12 \left (\Sigma(1) + \Sigma(1)^T \right),
$$
where $\Sigma(i)$ is the lag ...
- 13.8k