A1734
Title: A test on the location of tangency portfolio for small sample size and singular covariance matrix
Authors: Svitlana Drin - Orebro University (Sweden)
Stepan Mazur - Orebro University (Sweden)
Stanislas Muhinyuza - Linnaeus University (Sweden) [presenting]
Abstract: The test for the location of the tangency portfolio is proposed on the set of feasible portfolios when both the population and the sample covariance matrices of asset returns are singular. The distribution of the test statistic is derived under both the null and alternative hypotheses. Furthermore, the high-dimensional asymptotic distribution of that test statistic is established when both the portfolio dimension and the sample size increase to infinity. The theoretical findings are complemented by comparing the high-dimensional asymptotic test with an exact finite sample test in the numerical study. A good performance of the obtained results is documented.
