High Dimensional Minimum Variance Portfolio Estimation

Prof.Li Yingying is an associate professor in the Department of ISOM and Department of Finance, Hong Kong University of Science and Technology. As an expert in financial econometrics, she has published papers in several top-tier journals, including Econometrica, Journal of Financial Economics, Journal of Econometrics, Journal of the American Statistical Association, and Annals of Statistics, among others.

We study the estimation of high dimensional minimum variance portfolio (MVP).Under the high frequency setting, returns can exhibit heteroskedasticity and possibly be contaminated by microstructure noise. Under some sparsity assumptions on the precision matrix, we propose an estimator of MVP, which asymptotically achieves the minimum variance. Simulation and empirical studies demonstrate that our proposed portfolio performs favorably.