Supplementary Appendix to: A Coskewness Shrinkage Approach for Estimating the Skewness of Linear Combinations of Random Variables

40 Pages Posted: 18 May 2017 Last revised: 4 Jun 2018

See all articles by Kris Boudt

Kris Boudt

Ghent University; Vrije Universiteit Brussel; Vrije Universiteit Amsterdam

Dries Cornilly

Vrije Universiteit Brussel (VUB); KU Leuven

Tim Verdonck

KU Leuven

Date Written: May 17, 2017

Abstract

Full Paper is available at: https://ssrn.com/abstract=2839781

In the supplementary appendix to the paper Boudt, Cornilly, and Verdonck (2018) we discuss the impact of autocorrelation and a time-varying structure on the estima- tion of coskewness matrices and provide more explanation about structured estima- tion. We go into more detail about our approach of optimizing the targets and provide several examples of other coskewness matrices in the literature. In particular, we pro- vide guidance how to use the latent single-factor coskewness matrix of Simaan (1993) in a shrinkage setting and correct the estimators provided in Martellini and Ziemann (2010) to estimate C(Φ ,T) for their observed single-factor and constant correlation coskewness estimators. The simulation setting discussed in the main paper is explored into more detail and we study three additional data generating processes. Further- more, we provide details on the empirical application studied in the main paper and extend the empirical study of Martellini and Ziemann (2010). Finally, we introduce the R code, publicly available in the PerformanceAnalytics package of Peterson and Carl (2018), for all single- and multi-target shrinkage estimators.

Keywords: Coskewness, MSE, multiple targets, portfolio optimisation, shrinkage

JEL Classification: G110, C130

Suggested Citation

Boudt, Kris and Cornilly, Dries and Verdonck, Tim, Supplementary Appendix to: A Coskewness Shrinkage Approach for Estimating the Skewness of Linear Combinations of Random Variables (May 17, 2017). Available at SSRN: https://ssrn.com/abstract=2970015 or http://dx.doi.org/10.2139/ssrn.2970015

Kris Boudt

Ghent University ( email )

Sint-Pietersplein 5
Gent, 9000
Belgium

Vrije Universiteit Brussel ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Dries Cornilly (Contact Author)

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
Brussels, Brussels 1050
Belgium

KU Leuven

Celestijnenlaan 200B
Leuven, Vlaams-Brabant 3001
Belgium

Tim Verdonck

KU Leuven ( email )

Celestijnenlaan 200B
Leuven, 3001
Belgium

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