The distribution of sample mean-variance portfolio weights

Raymond Kan (), Nathan Lassance () and Xiaolu Wang ()
Additional contact information
Raymond Kan: Rotman School of Management, University of Toronto
Nathan Lassance: Université catholique de Louvain, LIDAM/LFIN, Belgium
Xiaolu Wang: Ivy College of Business, Iowa State University

No 2023006, LIDAM Discussion Papers LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: We present a simple stochastic representation for the joint distribution of sample estimates of three scalar parameters and two vectors of portfolio weights that characterize the minimum-variance frontier. This stochastic representation is useful for sampling observations efficiently, deriving moments in closed-form, and studying the distribution and performance of many portfolio strategies that are functions of these five variables. We also present the asymptotic joint distributions of these five variables for both the standard regime and the high-dimensional regime. Both asymptotic distributions are simpler than the finite-sample one, and the one for the high-dimensional regime, i.e., when the number of assets and the sample size go together to infinity at a constant rate, reveals the high-dimensional properties of the considered estimators. Our results extend upon [T. Bodnar, H. Dette, N. Parolya and E. Thorst ́en, Sampling distributions of optimal portfolio weights and characteristics in low and large dimensions, Random Matrices: Theory Appl. 11 (2022)].

Keywords: Portfolio choice; estimation risk; stochastic representation; high-dimensional asymptotics; minimum-variance frontier (search for similar items in EconPapers)
Pages: 19
Date: 2023-05-18
New Economics Papers: this item is included in nep-ecm
References: Add references at CitEc
Citations:

Downloads: (external link)
https://dial.uclouvain.be/pr/boreal/en/object/bore ... tastream/PDF_01/view (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ajf:louvlf:2023006

Access Statistics for this paper

More papers in LIDAM Discussion Papers LFIN from Université catholique de Louvain, Louvain Finance (LFIN) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Séverine De Visscher ().