Asset Allocation Strategies Using Covariance Matrix Estimators

Abstract The covariance matrix is an important element of many asset allocation strategies. widely used sample estimator unstable especially when the number time observations small and assets large or high-dimensional data involved in computation. In this study, we focus on most estimators that are applied a group Markowitz-type strategies also recently introduced method based hierarchical tree clustering. performance tests portfolio using different rely out-of-sample characteristics synthetic real stock data.