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Bayesian estimation of the global minimum variance portfolio
Department of Mathematics, Stockholm University, Stockholm, Sweden.
Department of Statistics, Lund University, Lund, Sweden. (Statistics)
Department of Statistics, University of Augsburg, Augsburg, Germany.
2017 (English)In: European Journal of Operational Research, ISSN 0377-2217, E-ISSN 1872-6860, Vol. 256, no 1, 292-307 p.Article in journal (Refereed) Published
Abstract [en]

In this paper we consider the estimation of the weights of optimal portfolios from the Bayesian point of view under the assumption that the conditional distributions of the logarithmic returns are normal. Using the standard priors for the mean vector and the covariance matrix, we derive the posterior distributions for the weights of the global minimum variance portfolio. Moreover, we reparameterize the model to allow informative and non-informative priors directly for the weights of the global minimum variance portfolio. The posterior distributions of the portfolio weights are derived in explicit form for almost all models. The models are compared by using the coverage probabilities of credible intervals. In an empirical study we analyze the posterior densities of the weights of an international portfolio. 

Place, publisher, year, edition, pages
Elsevier, 2017. Vol. 256, no 1, 292-307 p.
Keyword [en]
Global minimum variance portfolio, Posterior distribution, Credible interval, Wishart distribution
National Category
Probability Theory and Statistics
Research subject
Statistics
Identifiers
URN: urn:nbn:se:oru:diva-54836DOI: 10.1016/j.ejor.2016.05.044ISI: 000384854500027Scopus ID: 2-s2.0-84990243844OAI: oai:DiVA.org:oru-54836DiVA: diva2:1066850
Note

Funding Agencies:

German Science Foundation (DFG) BO3521/2  OK103/1  BO 3521/3-1  SCHM 859/13-1

German Science Foundation (DFG) via the Research Unit 1735 "Structural Inference in Statistics: Adaptation and Efficiency"

Available from: 2017-01-19 Created: 2017-01-20 Last updated: 2017-01-19Bibliographically approved

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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
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Output format
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  • asciidoc
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