variability. By doing so, we introduce bias, but reduce variance. In this paper, we give details on feasible optimal shrinkage …

Shrinkage estimation of the covariance matrix of asset returns was introduced to the finance profession several years … paper presents, from a pedagogic perspective, an introduction to shrinkage estimation and uses Microsoft ExcelTM for its …

stock data are used to demonstrate the relative robustness of BFGMRES to illiquidity when compared to the “shrinkage to … ratios and standard deviations for filtered data. In a simulation study, we show that BFGMRES is more robust than shrinkage … to market in the presence of data irregularities. Indeed, when there is an illiquid stock shrinkage to market allocates …