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

作者：Bodnar Taras; Mazur Stepan^*; Podgorski Krzysztof; Tyrcha Joanna

来源：Journal of Statistical Planning and Inference, 2019, 201: 40-57.

DOI：10.1016/j.jspi.2018.11.003

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

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.

• 出版日期2019-7