A test for the global minimum variance portfolio for small sample and singular covariance

• Recently, a test dealing with the linear hypothesis for the global minimum variance portfolio weights was obtained under the assumption of non-singular covariance matrix. However, the problem of potential multicollinearity and correlations of assets constitutes a limitation of the classical portfolio theory. Therefore, there is an interest in developing theory in the presence of singularities in the covariance matrix. In this paper, we extend the test by analyzing the portfolio weights in the small sample case with a singular population covariance matrix. The results are illustrated using actual stock returns and a discussion of practical relevance of the model is presented. 

Ämnesord

NATURVETENSKAP  -- Matematik -- Sannolikhetsteori och statistik (hsv//swe)

NATURAL SCIENCES  -- Mathematics -- Probability Theory and Statistics (hsv//eng)

NATURVETENSKAP  -- Matematik (hsv//swe)

NATURAL SCIENCES  -- Mathematics (hsv//eng)

Nyckelord

Global minimum variance portfolio

Singular Wishart distribution

Singular covariance matrix

Small sample problem

Mathematics

Matematik

Global minimum variance portfolio

Singular covariance matrix

Singular Wishart distribution

Small sample problem

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