I have a historical covariance matrix which is invertible for daily and monthly returns. I used the Ledoit,Wolf shrinkage estimator for the covariance matrix and now I get really small portfolio variances, implying unrealistic Sharpe-ratios. I assume this has to do with the fact that I didn't shrink the return vector. Which shrinkage estimator would you use on the return vector? Do you know any R-Script for this?