Disentangling the role of variance and covariance information in portfolio selection problems

References

• Ardia, D. , Bolliger, G. , Boudt, K. and Gagnon-Fleury, J.P. , The impact of covariance misspecification in risk-based portfolios. Ann. Oper. Res. , 2017, 254 , 1–16.
   Web of Science ®Google Scholar
• Balduzzi, P. and Lynch, A.W. , Transaction costs and predictability: Some utility cost calculations. J. Financ. Econ. , 1999, 52 , 47–78.
   Web of Science ®Google Scholar
• Barndorff-Nielsen, O.E. and Shephard, N. , Econometric analysis of realized covariation: High frequency based covariance, regression, and correlation in financial economics. Econometrica , 2004, 72 , 885–925.
   Web of Science ®Google Scholar
• Chan, L.K. , Karceski, J. and Lakonishok, J. , On portfolio optimization: Forecasting covariances and choosing the risk model. Rev. Financ. Stud. , 1999, 12 , 937–974.
   Web of Science ®Google Scholar
• Chopra, V. and Ziemba, W. , The effect of errors in means, variances, and covariances on optimal portfolio choice. J. Portfolio Manage. , 1993, 19 , 6–1.
   Web of Science ®Google Scholar
• de Pooter, M. , Martens, M. and van Dijk, D. , Predicting the daily covariance matrix for S &P 100 stocks using intraday data: But wich frequency to use? Econ. Rev. , 2008, 27 , 199–229.
   Google Scholar
• DeMiguel, V. , Garlappi, L. , Nogales, F.J. and Uppal, R. , A generalized approach to portfolio optimization: Improving performance by constraining portfolio norms. Manage. Sci. , 2009a, 55 , 798–812.
   Web of Science ®Google Scholar
• DeMiguel, V. , Garlappi, L. and Uppal, R. , Optimal versus naive diversification: How inefficient is the 1/N portfolio strategy? Rev. Financ. Stud. , 2009b, 22 , 1915–1953.
   Web of Science ®Google Scholar
• DeMiguel, V. , Martin-Utrera, A. and Nogales, F.J. , Size matters: Optimal calibration of shrinkage estimators for portfolio selection. J. Bank. Finance , 2013, 37 , 3018–3034.
   Web of Science ®Google Scholar
• Engle, R. and Colacito, R. , Testing and valuing dynamic correlations for asset allocation. J. Bus. Econ. Stat. , 2006, 24 , 238–253.
   Web of Science ®Google Scholar
• Golosnoy, V. and Okhrin, Y. , Multivariate shrinkage for optimal portfolio weights. Eur. J. Finance , 2007, 13 , 441–458.
   Google Scholar
• Golosnoy, V. and Okhrin, Y. , Flexible shrinkage in portfolio selection. J. Econ. Dyn. Control , 2009, 33 , 317–328.
   Web of Science ®Google Scholar
• Han, Y. , Asset allocation with a high dimensional latent factor stochasticvolatility model. Rev. Financ. Stud. , 2006, 19 , 237–271.
   Web of Science ®Google Scholar
• Henderson, H.V. and Searle, S.R. , On deriving the inverse of a sum of matrices. SIAM Rev. , 1981, 23 , 53–60.
   Web of Science ®Google Scholar
• Jorion, P. , Bayes-Stein estimation for portfolio analysis. J. Financ. Quant. Anal. , 1986, 21 , 279–292.
   Web of Science ®Google Scholar
• Kan, R. , Wang, X. and Zhou, G. , On the value of portfolio optimization in the presence of estimation risk: The case with and without risk-free asset. Rotman School of Management Working Paper No. 2819254, 2016.
   Google Scholar
• Kan, R. and Zhou, G. , Optimal portfolio choice with parameter uncertainty. J. Financ. Quant. Analysis , 2007, 42 , 621–656.
   Web of Science ®Google Scholar
• Kirby, C. and Ostdiek, B. , It’s all in the timing: simple active portfolio strategies that outperform naive diversification. J. Financ. Quant. Anal. , 2012, 47 , 437–467.
   Web of Science ®Google Scholar
• Klein, R.W. and Bawa, V.S. , The effect of estimation risk on optimal portfolio choice. J. Financ. Econ. , 1976, 3 , 215–231.
   Web of Science ®Google Scholar
• Kolm, P.N. , Tütüncü, R. and Fabozzi, F.J. , 60 Years of portfolio optimization: Practical challenges and current trends. Eur. J. Oper. Res. , 2014, 234 , 356–371.
   Web of Science ®Google Scholar
• Ledoit, O. and Wolf, M. , Robust performance hypothesis testing with the Sharpe ratio. J. Emp. Finance , 2008, 15 , 850–859.
   Web of Science ®Google Scholar
• Ledoit, O. and Wolf, M. , Honey, I shrunk the sample covariance matrix. UPF Economics and Business Working Paper, 2003a.
   Google Scholar
• Ledoit, O. and Wolf, M. , Improved estimation of the covariance matrix of stock returns with an application to portfolio selection. J. Emp. Finance , 2003b, 10 , 603–621.
   Google Scholar
• Ledoit, O. and Wolf, M. , A well-conditioned estimator for large-dimensional covariance matrices. J. Multivar. Anal. , 2004, 88 , 365–411.
   Web of Science ®Google Scholar
• Liu, Q. , On portfolio optimization: How and when do we benefit from high-frequency data? J. Appl. Economet. , 2009, 24 , 560–582.
   Web of Science ®Google Scholar
• MacKinlay, A.C. and Pástor, L. , Asset pricing models: Implications for expected returns and portfolio selection. Rev. Financ. Stud. , 2000, 13 , 883–916.
   Web of Science ®Google Scholar
• Markowitz, H. , Portfolio selection. J. Finance , 1952, 7 , 77–91.
   Web of Science ®Google Scholar
• Merton, R.C. , On estimating the expected return on the market: An exploratory investigation. J. Financ. Econ. , 1980, 8 , 323–361.
   Web of Science ®Google Scholar
• Michaud, R.O. , The Markowitz optimization enigma: Is optimized optimal? ICFA Continuing Edu. Ser. , 1989, 1989 , 43–54.
   Google Scholar
• Olivares-Nadal, A.V. and DeMiguel, V. , Technical note---A robust perspective on transaction costs in portfolio optimization. Oper. Res. Forthcoming.
   Web of Science ®Google Scholar
• Scherer, B. , A note on the returns from minimum variance investing. J. Emp. Finance , 2011, 18 , 652–660.
   Web of Science ®Google Scholar
• Stein, C. , Inadmissibility of the usual estimator for the mean of a multivariate normal distribution. Proceedings of the Proceedings of the Third Berkeley symposium on mathematical statistics and probability , 1956, 1 , 197–206.
   Google Scholar
• Stivers, C. and Sun, L. , Mitigating estimation risk in asset allocation: Diagonal models versus 1/N diversification. Financ. Rev. , 2016, 51 , 403–433.
   Web of Science ®Google Scholar
• Tu, J. and Zhou, G. , Markowitz meets Talmud: A combination of sophisticated and naive diversification strategies. J. Financ. Econ. , 2011, 99 , 204–215.
   Web of Science ®Google Scholar
• Zakamulin, V. , Superiority of optimized portfolios to naive diversification: Fact or fiction? Finance Res. Lett. , 2017, 22 , 122–128.
   Web of Science ®Google Scholar