New answers tagged covariance-matrix
2
Q1. Calculating the GMVP involves three operations:
Inverting the covariance matrix $\Sigma$
Multiplying the inverse by a column vector of 1's on the right: $x=\Sigma^{-1} \mathbf{1}$
Normalizing this vector so the elements sum to 1: $w= \frac{x}{1^T x}$
Note that the expected returns $\mu$ are nowhere used in this calculation.
If you multiply the ...
1
For Q1, it shouldn't. You're simply multiplying the covariance matrix by a constant. However, the optimal GMV portfolio is very sensitive to inputs. The difference could simply be due to rounding (I'm assuming the differences are quite small).
Another way annualizing could change your outputs is if you're using transaction cost (of any other trade-off with ...
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