Arbeitspapier

Estimation of a multiplicative covariance structure

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We consider a Kronecker product structure for large covariance matrices, which has the feature that the number of free parameters increases logarithmically with the dimensions of the matrix. We propose an estimation method of the free parameters based on the log linear property of this structure, and also a Quasi-Likelihood method. We establish the rate of convergence of the estimated parameters when the size of the matrix diverges. We also establish a CLT for our method. We apply the method to portfolio choice for S&P500 daily returns and compare with sample covariance based methods and with the recent Fan et al. (2013) method.

Language: Englisch

Bibliographic citation: Series: cemmap working paper ; No. CWP23/16

Classification: Wirtschaft

Subject: Correlation Matrix
Kronecker Product
MTMM
Portfolio Choice

Event: Geistige Schöpfung

(who): Hafner, Christian M.
Linton, Oliver Bruce
Tang, Haihan

Event: Veröffentlichung

(who): Centre for Microdata Methods and Practice (cemmap)

(where): London

(when): 2016

DOI: doi:10.1920/wp.cem.2016.2316

Handle: http://hdl.handle.net/10419/149769

Last update: 10.03.2025, 11:45 AM CET

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Object type

Arbeitspapier

Associated

Hafner, Christian M.
Linton, Oliver Bruce
Tang, Haihan
Centre for Microdata Methods and Practice (cemmap)

Time of origin

2016

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