Estimation of Out-of-Sample Sharpe Ratio for High Dimensional Portfolio
Optimization
Estimation of Out-of-Sample Sharpe Ratio for High Dimensional Portfolio
Optimization
Portfolio optimization aims at constructing a realistic portfolio with significant out-of-sample performance, which is typically measured by the out-of-sample Sharpe ratio. However, due to in-sample optimism, it is inappropriate to use the in-sample estimated covariance to evaluate the out-of-sample Sharpe, especially in the high dimensional settings. In this paper, we …