Title: Estimation of a multiplicative covariance structure
Authors: Christian Hafner - UCL Louvain-la-Neuve (Belgium) [presenting]
Oliver Linton - University of Cambridge (United Kingdom)
Haihan Tang - University of Cambridge (United Kingdom)
Abstract: A Kronecker product structure for large covariance matrices is considered, which has the feature that the number of free parameters increases logarithmically with the dimensions of the matrix. We propose an estimation method of the free parameters based on the log linear property of these structures, and also a Quasi-Likelihood method. We establish the rate of convergence of the estimated parameters when the size of the matrix diverges. We also establish a CLT for our method. We apply the method to portfolio choice for S\&P500 daily returns and compare with alternative methods.