sampling error in the asset covariance matrix leads to systematic biases in the volatility and correlation forecasts of these …

’s other assets, but correlation is useful only if it provides a good estimate of how an asset’s returns co-occur cumulatively … with the other asset returns over the investor’s prospective horizon. And because correlation is an average of sub …

We consider the problem of portfolio optimization with a correlation constraint. The framework is the multi …-period stochastic financial market setting with one tradable stock, stochastic income, and a non-tradable index. The correlation … portofolio´s expected exponential utility subject to the correlation constraint. Two types of optimal portfolio strategies are …