Covariance Averaging for Improved Estimation and Portfolio Allocation

We propose a new method for estimating the covariance matrix of a multivariate time series of nancial returns. The method is based on estimating sample covariances from overlapping windows of observations which are then appropriately weighted to obtain the nal covariance estimate. We extend the idea of (model) covariance averaging o ered in the covariance shrinkage approach by means of greater ease of use, exibility and robustness in averaging information over different data segments. The suggested approach does not su er from the curse of dimensionality and can be used without problems of either approximation or any demand for numerical optimization.

Tower and Pedestrian Mall

The original Master Plan of 1964 called for the campus to stretch out 1 1/4 miles across the escarpment with arts buildings west of the tower and science buildings to the east. This plan laid out the development of Brock for the next 10 or 11 years by which time enrollment was expected to be near 8000 students. Pictured here is the tower and university centre. The view is looking east towards a cluster of science buildings and residences in the background.

Amphitheatre and Tower

The original Master Plan of 1964 called for the campus to stretch out 1 1/4 miles across the escarpment with arts buildings west of the tower and science buildings to the east. This plan laid out the development of Brock for the next 10 or 11 years by which time enrollment was expected to be near 8000 students. Pictured here is the tower and behind it, in the lower left portion of the picture, the planned outdoor amphitheatre. This view is from the edge of the escarpment facing southward or southeast.

Tower and Thistle

The Schmon Tower and part of the Thistle Complex as viewed from the west.

Tower and Ramp Construction

The Schmon Tower around 1968 when the ramp was being constructed. The Thistle ramp was torn down around two decades later to make room for Taro Hall and the Alumni Building.

Tower and Thistle Construction

Distant view of the tower and construction of the Thistle Complex.

Tower and Mackenzie Chown

The Tower and part of Mackenzie Chown's A Block as viewed from the south.

Covariance, correlations, and r squared

lecture slides for COMP6235