RT Journal Article
SR Electronic
T1 Shrinking the Covariance Matrix
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 55
OP 63
DO 10.3905/jpm.2007.690606
VO 33
IS 4
A1 David J. Disatnik
A1 Simon Benninga
YR 2007
UL https://pm-research.com/content/33/4/55.abstract
AB The subject here is construction of the covariance matrix for portfolio optimization. In terms of the ex post standard deviation of the global minimum-variance portfolio, there is no statistically significant gain in using more sophisticated shrinkage estimators rather than simpler portfolios of estimators. This finding holds whether or not the investor imposes short sale constraints to prevent portfolio weights from being negative.TOPICS: Portfolio construction, statistical methods, risk management