DOSPortfolio-package {DOSPortfolio}

A set of tools for constructing Dynamic Optimal Shrinkage estimator of the global minimum variance portfolio.

Description

The DOSPortfolio package consists of two shrinkage estimators for the Global Minimum Variance (GMV) portfolio. These are implemented in the packages main interface: DOSPortfolio. The shrinkage is performed at fixed reallocation points in a dynamic manner where the sample estimator of the GMV weights is shrunk towards the holding portfolio. The reallocation points are specified by a deterministic sequence given a priori. The estimation is performed such that the shrinkage coefficients are optimal for large portfolios, e.g. there are many assets in comparison to observations. The main interface validates the main assumptions of the theory used to derive these methods.

Methods

DOSPortfolio: (Bodnar et al. 2021)

References

Bodnar T, Parolya N, Thorsén E (2021). “Dynamic Shrinkage Estimation of the High-Dimensional Minimum-Variance Portfolio.” arXiv preprint arXiv:2106.02131. https://arxiv.org/abs/2106.02131.