We study the distribution of hard-, soft-, and adaptive soft-thresholding estimators within a linear regression model where the number of parameters k can depend on sample size n and may diverge with n. In addition to the case of known error-variance, we define and study versions of the...

Markowitz (1952) portfolio selection requires an estimator of the covariance matrix of returns. To address this problem, we promote a nonlinear shrinkage estimator that is more flexible than previous linear shrinkage estimators and has just the right number of free parameters (that is, the...

Multivariate GARCH models do not perform well in large dimensions due to the so-called curse of dimensionality. The recent DCC-NL model of Engle et al. (2019) is able to overcome this curse via nonlinear shrinkage estimation of the unconditional correlation matrix. In this paper, we show how...

Statistical inferences for weights of the global minimum variance portfolio (GMVP) are of both theoretical and practical relevance for mean-variance portfolio selection. Daily realized GMVP weights depend only on realized covariance matrix computed from intraday highfrequency returns. In this...

We estimate corporate bond portfolios using numerous asset-specific characteristics. Our portfolio weights accommodate a large cross-section and allow for a flexible management of turnover and liquidity. A portfolio tilted toward higher maturity, credit risk, coupon, momentum, and size...

Many financial decisions such as portfolio allocation, risk management, option pricing and hedge strategies are based on forecasts of the conditional variances, covariances and correlations of financial returns. The paper shows an empirical comparison of several methods to predict one-step-ahead...

This paper studies the estimation of high-dimensional minimum variance portfolio (MVP) based on the high frequency returns which can exhibit heteroscedasticity and possibly be contaminated by microstructure noise. Under certain sparsity assumptions on the precision matrix, we propose estimators...

Under the new regulation based on Basel solvency framework, known as Basel III and Basel IV, financial institutions must calculate the market risk capital requirements based on the Expected Shortfall (ES) measure, replacing the Value at Risk (VaR) measure. In the financial literature, there are...