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I recently used a R package CovTools in R with the command CovEst.2003LW(X), where X is your sample covariance matrix as an input, to compute the shrunk covariance matrix (an estimate that is closest to the true covariance matrix). For reference, the package resides here:

https://search.r-project.org/CRAN/refmans/CovTools/html/CovEst.2003LW.html

Can any portfolio optimization or R experts provide their insights into whether this package is trustable? The package is based on the famous paper "Honey, I Shrunk the Sample Covariance Matrix" by Ledoit and Wolf (2003).

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    $\begingroup$ If you do not get an answer here, but might want to ask at R-SIG-Finance (stat.ethz.ch/mailman/listinfo/r-sig-finance). Several packages on CRAN implement Ledoit--Wolf (e.g. RiskPortfolios::covEstimation or BurStFin::var.shrink.eqcor), so you also compare results. $\endgroup$ Nov 2, 2023 at 11:17

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You can use the code provided from the authors directly. Michael Wolf has a whole library of examples here in different programming languages. For the "Honey, I Shrunk the Covariance Matrix" paper you can check out this Github repo.

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