Posts Tagged ‘ covariance matrix ’

What are the distributions on the positive k-dimensional quadrant with parametrizable covariance matrix? (solved)

April 7, 2012
By
What are the distributions on the positive k-dimensional quadrant with parametrizable covariance matrix? (solved)

Paulo (from the Instituto de Matemática e Estatística, Universidade de São Paulo, Brazil) has posted an answer to my earlier question both as a comment on the ‘Og and as a solution on StackOverflow (with a much more readable LaTeX output). His solution is based on the observation that the multidimensional log-normal distribution still allows

Read more »

Specific differences between Ledoit-Wolf and factor models

May 22, 2011
By
Specific differences between Ledoit-Wolf and factor models

What can we learn about the difference in structure between a Ledoit-Wolf variance matrix and a corresponding factor model variance? Previously We’ve generated a set of random portfolios with constraints on the risk fractions of a Ledoit-Wolf variance matrix, and a corresponding set of random portfolios with risk fraction constraints from a statistical factor model. … Continue reading...

Read more »

A test of Ledoit-Wolf versus a factor model

April 27, 2011
By
A test of Ledoit-Wolf versus a factor model

Statistical factor models and Ledoit-Wolf shrinkage are competing methods for estimating variance matrices of returns.  So which is better?  This adds a data point for answering that question. Previously There are past blog posts on: the idea of variance matrices factor models of variance The data in this post are from the blog posts: “Weight … Continue reading...

Read more »

Factor models of variance in finance

March 7, 2011
By
Factor models of variance in finance

In “What the hell is a variance matrix?” I talked about the basics of variance matrices and highlighted challenges for estimating them in finance.  Here we look more deeply at the most popular estimation technique. Models for variance matrices The types of variance estimates that are used in finance can be classified as: Sample estimate … Continue reading...

Read more »