Statistical Inferences for Realized Portfolio Weights

24 Pages Posted: 4 Sep 2018

See all articles by Vasyl Golosnoy

Vasyl Golosnoy

Ruhr University of Bochum

Wolfgang Schmid

Europa-Universitaet Viadrina

Miriam Isabel Seifert

Ruhr University of Bochum

Taras Lazariv

European University Viadrina Frankfurt (Oder)

Date Written: August 25, 2018

Abstract

Statistical inferences for weights of the global minimum variance portfolio (GMVP) are of both theoretical and practical relevance for mean-variance portfolio selection. Daily realized GMVP weights depend only on realized covariance matrix computed from intraday highfrequency returns. In this paper we deduce both finite sample and asymptotic distributional properties of the realized GMVP weights. Then we develop statistical tests for the GMVP proportions and elaborate sequential monitoring procedures for on-line decisions whether a given portfolio composition deviates from the current GMVP significantly. Our theoretical results are illustrated both in Monte Carlo simulations and in an empirical application.

Keywords: minimum variance portfolio, realized covariance matrix, structural change, control charts, tests for portfolio weights

JEL Classification: C13, C40, C58, G01, G11

Suggested Citation

Golosnoy, Vasyl and Schmid, Wolfgang and Seifert, Miriam Isabel and Lazariv, Taras, Statistical Inferences for Realized Portfolio Weights (August 25, 2018). Available at SSRN: https://ssrn.com/abstract=3238643 or http://dx.doi.org/10.2139/ssrn.3238643

Vasyl Golosnoy (Contact Author)

Ruhr University of Bochum ( email )

Universit├Ątsstra├če 150
Bochum, NRW 44780
Germany

Wolfgang Schmid

Europa-Universitaet Viadrina ( email )

Grosse Scharrnstr. 59
Department of Statistics
D-15230 Frankfurt (Oder)
Germany

Miriam Isabel Seifert

Ruhr University of Bochum ( email )

Bochum, 44780
Germany

Taras Lazariv

European University Viadrina Frankfurt (Oder) ( email )

Grosse Scharrnstr. 59
Frankfurt (Oder), Brandenburg 15230
Germany

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