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Tangency portfolio weights for singular covariance matrix in small and large dimensions: estimation and test theory
Department of Mathematics, Stockholm University, Stockholm, Sweden.
Örebro University, Örebro University School of Business. Department of Statistics.ORCID iD: 0000-0002-1395-9427
Department of Statistics, Lund University, Lund, Sweden.
Department of Mathematics, Stockholm University, Stockholm, Sweden.
2019 (English)In: Journal of Statistical Planning and Inference, ISSN 0378-3758, E-ISSN 1873-1171, Vol. 201, p. 28p. 40-57Article in journal (Refereed) Published
Abstract [en]

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 the 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. 

Place, publisher, year, edition, pages
Elsevier, 2019. Vol. 201, p. 28p. 40-57
Keywords [en]
Tangency portfolio, singular Wishart distribution, singular covariance matrix, high-dimensional asymptotics, hypothesis testing
National Category
Probability Theory and Statistics
Identifiers
URN: urn:nbn:se:oru:diva-63498DOI: 10.1016/j.jspi.2018.11.003ISI: 000459528700004Scopus ID: 2-s2.0-85058549449OAI: oai:DiVA.org:oru-63498DiVA, id: diva2:1168298
Funder
Swedish Research Council, 2008-5382
Note

Funding Agencies:

Örebro University, Sweden  

Project "Models for macro and financial economics after the financial crisis" - Jan Wallander and Tom Hedelius Foundation, Sweden  P18-0201 

Available from: 2017-12-20 Created: 2017-12-20 Last updated: 2019-06-18Bibliographically approved

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Mazur, Stepan

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CiteExportLink to record
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Cite
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
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf