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This paper deals with estimation of high-dimensional covariance with a conditional sparsity structure, which is the composition of a low-rank matrix plus a sparse matrix. By assuming sparse error covariance matrix in a multi-factor model, we allow the presence of the cross-sectional correlation...
Persistent link: https://www.econbiz.de/10015231999
This paper deals with estimation of high-dimensional covariance with a conditional sparsity structure, which is the composition of a low-rank matrix plus a sparse matrix. By assuming sparse error covariance matrix in a multi-factor model, we allow the presence of the cross-sectional correlation...
Persistent link: https://www.econbiz.de/10011112962
Persistent link: https://www.econbiz.de/10010713427
The variance covariance matrix plays a central role in the inferential theories of high dimensional factor models in finance and economics. Popular regularization methods of directly exploiting sparsity are not directly applicable to many financial problems. Classical methods of estimating the...
Persistent link: https://www.econbiz.de/10013124819
This paper deals with the estimation of a high-dimensional covariance with a conditional sparsity structure and fast-diverging eigenvalues. By assuming sparse error covariance matrix in an approximate factor model, we allow for the presence of some cross-sectional correlation even after taking...
Persistent link: https://www.econbiz.de/10013091885
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Persistent link: https://www.econbiz.de/10011405086
Persistent link: https://www.econbiz.de/10011349458
We propose a novel technique to boost the power of testing a high-dimensional vector $H:\theta=0$ against sparse alternatives where the null hypothesis is violated only by a couple of components. Existing tests based on quadratic forms such as the Wald statistic often suffer from low powers due...
Persistent link: https://www.econbiz.de/10013062521
Estimating and assessing the risk of a large portfolio is an important topic in financial econometrics and risk management. The risk is often estimated by a substitution of a good estimator of the volatility matrix. However, the accuracy of such a risk estimator for large portfolios is largely...
Persistent link: https://www.econbiz.de/10013087298