High dimensional mean-variance optimization through factor analysis

JOURNAL OF MULTIVARIATE ANALYSIS

卷:133

Article

Chen, Binbin¹  Huang, Shih-Feng²  Pan, Guangming¹ 

[1] Nanyang Technol Univ, Singapore 637371, Singapore

[2] Natl Univ Kaohsiung, Kaohsiung, Taiwan

关键词: Factor model;    Optimal portfolio allocation;    Mean-variance optimization;   

DOI  :  10.1016/j.jmva.2014.09.006

来源: Elsevier

【 摘 要 】

A factor analysis-based approach for estimating high dimensional covariance matrix is proposed and is applied to solve the mean-variance portfolio optimization problem in finance. The consistency of the proposed estimator is established by imposing a factor model structure with a relative weak assumption on the relationship between the dimension and the sample size. Numerical results indicate that the proposed estimator outperforms the plug-in, linear shrinkage and bootstrap-corrected approaches. (C) 2014 Elsevier Inc. All rights reserved.

【 授权许可】

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