Sequential monitoring
of minimum variance portfolio |
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Authors: | Vasyl Golosnoy |
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Institution: | (1) Department of Statistics, European University Viadrina, 15230 Frankfurt (Oder), Germany |
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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. |
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Keywords: | |
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