Good morning to everyone except people who use a sample covariance matrix in their portfolio optimiser.
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It works. Especially weighted (e.g. EWMA) estimates. Depending on optimization and lookback can tune with shrinkage. Also not much benefit to factor models if you are already dealing with assets close to factors, e.g. diverse asset classes.
It can be ok if your portfolio is small enough. If you try to do this with a universe of ~3000 stocks you are in for a world of pain.
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Sure. Any optimisation with 3K stocks is going to be painful. But even then, you can still use your sample estimate(s) with regularization. But perhaps I'm taking your reference to "sample" estimate too broadly, and we're talking about different things.
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Yeah I would say if you are regularising it you are not using the sample cov matrix any more.
End of conversation
New conversation -
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At that point maybe you should just own the Russelpic.twitter.com/tXC72yWXh0
Thanks. Twitter will use this to make your timeline better. UndoUndo
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