In the context of modern portfolio theory, we compare the out-of-sample performance of eight investment strategies which are based on statistical methods with the out-of-sample performance of a family of trivial strategies. A wide range of approaches is considered in this work, including the...

We develop a general approach to portfolio optimization taking account of estimation risk and stylized facts of empirical finance. This is done within a Bayesian framework. The approximation of the posterior distribution of the unknown model parameters is based on a parallel tempering algorithm....

We study copulas generated by elliptical distributions. We show that their tail dependence can be simply computed with default routines on Student's t-distribution given Kendall's [tau] and the tail index. The copula family generated by the sub-Gaussian [alpha]-stable distribution is unable to...

Two shrinkage estimators for the global minimum variance portfolio that dominate the traditional estimator with respect to the out-of-sample variance of the portfolio return are derived. The presented results hold for any number of observations n = d 2 and number of assets d = 4. The...

Market efficiency at least requires the absence of weak arbitrage opportunities, but this is not sufficient to establish a situation where the market is sensitive, i.e., where it "fully reflects" or "rapidly adjusts to" some information flow including the evolution of asset prices. By contrast,...