Markowitz portfolio selection is a cornerstone in finance, both in academia and in the industry. Most academic studies either ignore transaction costs or account for them in a way that is both unrealistic and suboptimal by (i) assuming transaction costs to be constant across stocks and (ii)...

In this paper we consider modeling and forecasting of large realized covariance matrices by penalized vector autoregressive models. We propose using Lasso-type estimators to reduce the dimensionality to a manageable one and provide strong theoretical performance guarantees on the forecast...

In this paper we investigate the applied performance of covariance shrinkage in the portfolio optimisation problem. We suggest that the optimal shrinkage coefficient should be obtained from a numerical optimisation of a function with financial interpretation. Such a function could be the...