annuncio seminario

[Pietro Muliere <pietro.muliere@uni-bocconi.it>]

Istituto Metodi Quantitativi - Università L. Bocconi
Viale Isonzo, 25 - 20135 Milano
Tel. 02-58365629  - Fax 02-58365630



SEMINARIO


COVARIANCE MATRIX ESTIMATION, FACTOR MODELS, PORTOFOLIO SELECTION, SHRINKAGE



  Michael Wolf
Dept. of Economics and Business
Univ. Pompeu Fabra
and
Visiting Professor Univ.Bocconi



Giovedì, 14 marzo  2002  ore 16.00
Aula IMQ (stanza n. 137)




Abstract: This paper proposes to estimate the covariance matrix of stock 
returns by an optimally weighted average of two existing estimators: the 
sample covariance matrix and single-index covariance matrix. This method is 
generally know as shrinkage, and it is standard in decision theory and in 
empirical Bayesian statistics. Our shrinkage estimator can be seen as a way 
to account for extra-market covariance without having to specify an 
arbitrary multi-factor structure. For NYSE and AMEX stock returns from 
1972to 1995, it can be used to select portfolios with significantly lower 
out-of-sample variance than a set of existing estimators including 
multi-factor models.