Abstract
The optimized portfolio that is calculated by a covariance matrix has large sensitivities to small eigen values of the covariance matrix. Estimation of sampling errors for small eigen values is quite important for fund managers who construct their portfolios from estimated covariance matrixes. If they can calculate the sampling errors, they can construct robust portfolios. In this study, we propose the method of estimation of sampling error for eigen values from error of each element of covariance matrix. And we will show how this estimation is useful to optimized portfolio.
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