Abstract
This paper evaluates the economic effect of monitoring the minimum variance portfolio weights, which depend solely on the covariance matrix of returns. The investor decides whether the portfolio composition providing the smallest portfolio variance remains optimal at the beginning of every new investment period. For this purpose changes in the optimal weights are sequentially detected by means of EWMA control charts. Signals obtained from monitoring are used for improvement of the covariance matrix estimation procedure. The investment strategy exploiting signals from control charts is compared with a number of alternative approaches in the empirical study.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
