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L-moments for Robust Portfolio Allocation

By Ghislain Yanou, Emmanuel Jurczenko and Thierry Michel

Abstract

In this paper, we propose a methodology for building an estimator of the covariance matrix. We use a robust measure of moments called L-moments, and their extension into a multivariate framework. The Random matrix theory allows us to extract factors which contain real information. An empirical study in the American market shows that the Global Minimum L-variance Portfolio (GMLP) obtained from our estimator well performs the Global Minimum Variance Portfolio (GMVP) that acquired from the empirical estimator of the covariance matrix

Topics: Covariance Matrix, Lvariance-covariance, Lcorrelation, concomitance, Random matrix theory
Year: 2008
OAI identifier: oai:CiteSeerX.psu:10.1.1.353.2573
Provided by: CiteSeerX
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