Related papers: Neural Nonlinear Shrinkage of Covariance Matrices …

We study the design of portfolios under a minimum risk criterion. The performance of the optimized portfolio relies on the accuracy of the estimated covariance matrix of the portfolio asset returns. For large portfolios, the number of…

Portfolio optimization requires sophisticated covariance estimators that are able to filter out estimation noise. Non-linear shrinkage is a popular estimator based on how the Oracle eigenvalues can be computed using only data from the…

This paper investigates the large sample properties of the variance, weights, and risk of high-dimensional portfolios where the inverse of the covariance matrix of excess asset returns is estimated using a technique called nodewise…

In portfolio risk minimization, the inverse covariance matrix of returns is often unknown and has to be estimated in practice. This inverse covariance matrix also prescribes the hedge trades in which a stock is hedged by all the other…

We develop a rotation-invariant neural network that provides the global minimum-variance portfolio by jointly learning how to lag-transform historical returns and marginal volatilities and how to regularise the eigenvalues of large equity…

Many machine learning algorithms require precise estimates of covariance matrices. The sample covariance matrix performs poorly in high-dimensional settings, which has stimulated the development of alternative methods, the majority based on…

In this paper we construct a shrinkage estimator of the global minimum variance (GMV) portfolio by a combination of two techniques: Tikhonov regularization and direct shrinkage of portfolio weights. More specifically, we employ a double…

Much research has been carried out on shrinkage methods for real-valued covariance matrices. In spectral analysis of $p$-vector-valued time series there is often a need for good shrinkage methods too, most notably when the complex-valued…

One of the major challenges in multivariate analysis is the estimation of population covariance matrix from sample covariance matrix (SCM). Most recent covariance matrix estimators use either shrinkage transformations or asymptotic results…

The mean-variance model remains the most prevalent investment framework, built on diversification principles. However, it consistently struggles with estimation errors in expected returns and the covariance matrix, its core parameters. To…

This paper investigates an important problem of an appropriate variance-covariance matrix estimation in the Modern Portfolio Theory. We propose a novel framework for variancecovariance matrix estimation for purposes of the portfolio…

In this paper, new results in random matrix theory are derived which allow us to construct a shrinkage estimator of the global minimum variance (GMV) portfolio when the shrinkage target is a random object. More specifically, the shrinkage…

This paper examines the usefulness of high frequency data in estimating the covariance matrix for portfolio choice when the portfolio size is large. A computationally convenient nonlinear shrinkage estimator for the integrated covariance…

We consider the problem of optimizing a portfolio of financial assets, where the number of assets can be much larger than the number of observations. The optimal portfolio weights require estimating the inverse covariance matrix of excess…

In portfolio analysis, the traditional approach of replacing population moments with sample counterparts may lead to suboptimal portfolio choices. I show that optimal portfolio weights can be estimated using a machine learning (ML)…

In this paper we estimate the mean-variance portfolio in the high-dimensional case using the recent results from the theory of random matrices. We construct a linear shrinkage estimator which is distribution-free and is optimal in the sense…

In this paper, we exploit the spiked covariance structure of the clutter plus noise covariance matrix for radar signal processing. Using state-of-the-art techniques high dimensional statistics, we propose a nonlinear shrinkage-based…

Shrinkage can effectively improve the condition number and accuracy of covariance matrix estimation, especially for low-sample-support applications with the number of training samples smaller than the dimensionality. This paper investigates…

Many statistical applications require an estimate of a covariance matrix and/or its inverse. When the matrix dimension is large compared to the sample size, which happens frequently, the sample covariance matrix is known to perform poorly…

In this paper, we perform a comprehensive study of different covariance and precision matrix estimation methods in the context of minimum variance portfolio allocation. The set of models studied by us can be broadly categorized as: Gaussian…