Covariance Regression Analysis

41 Pages Posted: 10 Dec 2015

See all articles by Tao Zou

Tao Zou

Australian National University - Research School of Finance, Actuarial Studies & Statistics

Wei Lan

Peking University - Guanghua School of Management

Hansheng Wang

Peking University - Guanghua School of Management

Chih-Ling Tsai

University of California, Davis - Graduate School of Management

Date Written: December 8, 2015

Abstract

This article introduces covariance regression analysis for a p-dimensional response vector. The proposed method explores the regression relationship between the p-dimensional covariance matrix and auxiliary information. We study three types of estimators: maximum likelihood, ordinary least squares, and feasible generalized least squares estimators. Then, we demonstrate that these regression estimators are consistent and asymptotically normal. Furthermore, we obtain the high dimensional and large sample properties of the corresponding covariance matrix estimators. Simulation experiments are presented to demonstrate the performance of both regression and covariance matrix estimates. An example is analyzed from the Chinese stock market to illustrate the usefulness of the proposed covariance regression model.

Keywords: Covariance Regression; Covariance Matrix Estimation; Positive Definiteness; Portfolio Management

JEL Classification: C31

Suggested Citation

Zou, Tao and Lan, Wei and Wang, Hansheng and Tsai, Chih-Ling, Covariance Regression Analysis (December 8, 2015). Available at SSRN: https://ssrn.com/abstract=2700988 or http://dx.doi.org/10.2139/ssrn.2700988

Tao Zou

Australian National University - Research School of Finance, Actuarial Studies & Statistics ( email )

Canberra
Australia

HOME PAGE: http://www.rsfas.anu.edu.au/rsfas/people/?profile=Tao-Zou&tab=grantsAndPublications

Wei Lan

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Hansheng Wang (Contact Author)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

HOME PAGE: http://hansheng.gsm.pku.edu.cn

Chih-Ling Tsai

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States

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