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Portrait of Krzysztof Podgórski. Photo.

Krzysztof Podgórski

Professor, Head of the Department of Statistics

Portrait of Krzysztof Podgórski. Photo.

Tangency portfolio weights for singular covariance matrix in small and large dimensions : Estimation and test theory

Author

  • Taras Bodnar
  • Stepan Mazur
  • Krzysztof Podgórski
  • Joanna Tyrcha

Summary, in English

In this paper we derive the finite-sample distribution of the estimated weights of the tangency portfolio when both the population and the sample covariance matrices are singular. These results are used in the derivation of a statistical test on the weights of the tangency portfolio where the distribution of the test statistic is obtained under both the null and alternative hypotheses. Moreover, we establish the high-dimensional asymptotic distribution of the estimated weights of the tangency portfolio when both the portfolio dimension and the sample size increase to infinity. The theoretical findings are implemented in an empirical application dealing with the returns on the stocks included into the S&P 500 index.

Department/s

  • Department of Statistics

Publishing year

2019

Language

English

Pages

40-57

Publication/Series

Journal of Statistical Planning and Inference

Volume

201

Document type

Journal article

Publisher

North-Holland

Topic

  • Probability Theory and Statistics

Keywords

  • High-dimensional asymptotics
  • Hypothesis testing
  • Singular covariance matrix
  • Singular Wishart distribution
  • Tangency portfolio

Status

Published

ISBN/ISSN/Other

  • ISSN: 0378-3758