Purpose - Transaction cost becomes significant when one holds many securities in a large portfolio where capital allocations are frequently rebalanced due to variations in non-stationary statistical characteristics of the asset returns. The purpose of this paper is to employ a sparsing method to...

In this paper, the eigendecomposition of a Toeplitz matrix populated by an exponential function in order to model empirical correlations of US equity returns is investigated. The closed-form expressions for eigenvalues and eigenvectors of such a matrix are available. These eigenvectors are used...