Tangency portfolio weights for singular covariance matrix in small and large dimensions : Estimation and test theory
(2019) In Journal of Statistical Planning and Inference 201. p.40-57- Abstract
In this paper we derive the finite-sample distribution of the estimated weights of the tangency portfolio when both the population and the sample covariance matrices are singular. These results are used in the derivation of a statistical test on the weights of the tangency portfolio where the distribution of the test statistic is obtained under both the null and alternative hypotheses. Moreover, we establish the high-dimensional asymptotic distribution of the estimated weights of the tangency portfolio when both the portfolio dimension and the sample size increase to infinity. The theoretical findings are implemented in an empirical application dealing with the returns on the stocks included into the S&P 500 index.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/61fe929c-2cac-4b3f-87bb-25a07ccc9f22
- author
- Bodnar, Taras ; Mazur, Stepan LU ; Podgórski, Krzysztof LU and Tyrcha, Joanna
- organization
- publishing date
- 2019
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- High-dimensional asymptotics, Hypothesis testing, Singular covariance matrix, Singular Wishart distribution, Tangency portfolio
- in
- Journal of Statistical Planning and Inference
- volume
- 201
- pages
- 40 - 57
- publisher
- North-Holland
- external identifiers
-
- scopus:85058549449
- ISSN
- 0378-3758
- DOI
- 10.1016/j.jspi.2018.11.003
- language
- English
- LU publication?
- yes
- id
- 61fe929c-2cac-4b3f-87bb-25a07ccc9f22
- date added to LUP
- 2019-01-10 08:53:22
- date last changed
- 2022-04-25 20:01:46
@article{61fe929c-2cac-4b3f-87bb-25a07ccc9f22, abstract = {{<p>In this paper we derive the finite-sample distribution of the estimated weights of the tangency portfolio when both the population and the sample covariance matrices are singular. These results are used in the derivation of a statistical test on the weights of the tangency portfolio where the distribution of the test statistic is obtained under both the null and alternative hypotheses. Moreover, we establish the high-dimensional asymptotic distribution of the estimated weights of the tangency portfolio when both the portfolio dimension and the sample size increase to infinity. The theoretical findings are implemented in an empirical application dealing with the returns on the stocks included into the S&P 500 index.</p>}}, author = {{Bodnar, Taras and Mazur, Stepan and Podgórski, Krzysztof and Tyrcha, Joanna}}, issn = {{0378-3758}}, keywords = {{High-dimensional asymptotics; Hypothesis testing; Singular covariance matrix; Singular Wishart distribution; Tangency portfolio}}, language = {{eng}}, pages = {{40--57}}, publisher = {{North-Holland}}, series = {{Journal of Statistical Planning and Inference}}, title = {{Tangency portfolio weights for singular covariance matrix in small and large dimensions : Estimation and test theory}}, url = {{http://dx.doi.org/10.1016/j.jspi.2018.11.003}}, doi = {{10.1016/j.jspi.2018.11.003}}, volume = {{201}}, year = {{2019}}, }