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Home  >  Volume 25 (2013)

On Improved Portfolio Optimization: Alternative Approaches To Covariance Estimation by Alabi Abdulraouv O. and Gbolagade A.W. Vol.25 ( Nov. 2013). pp 295-302
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Forward looking information is employed in this paper to develop the first, second and third estimators for the covariance of the market returns.

In the performances of the three approaches, it is discovered that the performances show the clear picture of what value the covariance of the market return would have when certain conditions are put into consideration. The introduced constant p has value 0 throughout while constant k has value that ranges from-1 to 1. The three proposed values of k together with the constant value of P give difference values for covariance of market return.

The paper explains further the effect of the value of k at -1 on the covariance of the market return.

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