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Erik Thorsén

dblp:298/2381 · DBLP profile ↗
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1ranked-venue papers
0as first author
1since 2021 · last 2024
—ORCID · none

Domains — the database's venue-derived domains; a paper can count in several

Artificial intelligence and machine learning · 1 · 1 since 2021

Expertise — from the expertise taxonomy: the topics of the expert's papers under the CCF categories. A weight counts papers with recency: 1 for a paper about the topic, 0.3 when the topic is its context, halved every five years.

Theoretical computer science
1 paper
Mathematical optimization · 100%
Interdisciplinary, comprehensive, and emerging computing
1 paper
Computational finance and economics · 100%

Topics — the 3 heaviest of 3, each with the papers that count most for it

TopicWeightPapersLastEvidence papers
Computational finance and economics › portfolio management
portfolio optimization
0.812024
Two is Better Than One: Regularized Shrinkage of Large Minimum Variance Portfolios · J. Mach. Learn. Res. 2024
Mathematical optimization
regularization
0.812024
Two is Better Than One: Regularized Shrinkage of Large Minimum Variance Portfolios · J. Mach. Learn. Res. 2024
Mathematical optimization › regularization
shrinkage estimation
0.812024
Two is Better Than One: Regularized Shrinkage of Large Minimum Variance Portfolios · J. Mach. Learn. Res. 2024

Methods — techniques the papers use, named apart from their topics

tikhonov regularization · 1.5random matrix theory · 1.5linear shrinkage · 1.5
YearPublicationVenuePosition
2024 Two is Better Than One: Regularized Shrinkage of Large Minimum Variance Portfolios
abstract
In this paper, we construct a shrinkage estimator of the global minimum variance (GMV) portfolio by combining two techniques: Tikhonov regularization and direct shrinkage of portfolio weights. More specifically, we employ a double shrinkage approach, where the covariance matrix and portfolio weights are shrunk simultaneously. The ridge parameter controls the stability of the covariance matrix, while the portfolio shrinkage intensity shrinks the regularized portfolio weights to a predefined target. Both parameters simultaneously minimize, with probability one, the out-of-sample variance as the number of assets $p$ and the sample size $n$ tend to infinity, while their ratio $p/n$ tends to a constant $c > 0$. This method can also be seen as the optimal combination of the well-established linear shrinkage approach of Ledoit and Wolf (2004) and the shrinkage of the portfolio weights by Bodnar, Parolya and Schmid (2018). No specific distribution is assumed for the asset returns, except for the assumption of finite moments of order $4 + \varepsilon$ for $\varepsilon > 0$. The performance of the double shrinkage estimator is investigated via extensive simulation and empirical studies. The suggested method significantly outperforms its predecessor (without regularization) and the nonlinear shrinkage approach in terms of the out-of-sample variance, Sharpe ratio, and other empirical measures in the majority of scenarios. Moreover, it maintains the most stable portfolio weights with uniformly smallest turnover.
Taras Bodnar, Nestor Parolya, Erik Thorsén
J. Mach. Learn. Res.3