Tagged Questions
13
votes
3answers
3k views
What is the best way to “fix” a covariance matrix that is not positive semi-definite?
I have a sample covariance matrix of S&P 500 security returns where the smallest k-th eigenvalues are negative and quite small (reflecting noise and some high correlations in the matrix).
I am ...
9
votes
1answer
339 views
How to estimate the covariance of an index with a basket of stocks?
What would be an ideal way to estimate the covariance of an index with a basket of stocks? For example, should I use one-tail ANOVA test or an individual stock & index F-test?
10
votes
4answers
1k views
How do you evaluate a covariance forecast?
Suppose you have two sources of covariance forecasts on a fixed set of $n$ assets, method A and method B (you can think of them as black box forecasts, from two vendors, say), which are known to be ...
