Sample size and historical correlation matrices

Question

I was wondering whether any literatures existed on how to properly estimate correlation matrices from historical data.

Obviously the entire procedures allows a lot of leeway. The frequency of the data (daily, montly etc.), sample size, the atual method used to extract the correlation from the time-series and so on

Given the amount of decisions that have to be made and thus the amount of errors that can be made as well it would be nice to have some sources to turn to.

Answer 1

There is a wide knowledge on correlation estimation, see other questions and answers:

• principal component analysis (PCA) - Equity Risk Model Using PCA
• random matrix theory (RMT) - Cleansing covariance matrices via Random matrix theory or Random matrix theory (RMT) in finance
• shrinkage - Portfolio Optimization : Shrinkage of Covariance Matrix when data is available