Rafael Alves, Diego S. de Brito, Marcelo C. Medeiros, Ruy M. Ribeiro
arXiv 22 Mar 2023 · Finance — Statistical Finance · publishedJournal of Financial Econometrics (2023) · 19 citations (OpenAlex)
arXiv:2303.16151 · PDF · DOI · OpenAlex · Extracted main text
We propose a model to forecast large realized covariance matrices of returns, applying it to the constituents of the S&P 500 daily. To address the curse of dimensionality, we decompose the return covariance matrix using standard firm-level factors (e.g., size, value, and profitability) and use sectoral restrictions in the residual covariance matrix. This restricted model is then estimated using vector heterogeneous autoregressive (VHAR) models with the least absolute shrinkage and selection operator (LASSO). Our methodology improves forecasting precision relative to standard benchmarks and leads to better estimates of minimum variance portfolios.
appendix boundary found by appendix_command · 68% of the source is main text. Read the extracted text to check this.
The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Callot, L., A. Kock, and M. Medeiros (2017) Modeling and forecasting large realized covariance matrices and portfolio choice | 1.000 | 5 | 4 | 100% |
| 2 | Engle, R., O. Ledoit, and M. Wolf (2019) Large dynamic covariance matrices | 0.737 | 3 | 2 | 100% |
| 3 | Lunde, A., N. Shephard, and K. Sheppard (2016) Econometric analysis of vast covariance matrices using composite realized kernels and their application to portfolio choice | 0.737 | 3 | 2 | 100% |
| 4 | Chiu, T. and T. L. K.-W. Tsui (1996) The matrix-logarithmic covariance model | 0.644 | 2 | 2 | 100% |
| 5 | Tibshirani, R (1996) Regression shrinkage and selection via the LASSSO | 0.644 | 2 | 2 | 100% |
| 6 | Zou, H (2006) The adaptive LASSO and its oracle properties | 0.644 | 2 | 2 | 100% |
| Fan | unmatched citation key Fan | 0.585 | 3 | 1 | 100% |
| 8 | Cooper, M., H. Gulen, and M. Schill (2008) Asset growth and the cross-section of stock returns | 0.511 | 2 | 2 | 50% |
| 9 | Lyandres, E., L. Sun, and L. Zhang (2008) The new issues puzzle: Testing the investment-based explanation | 0.511 | 2 | 2 | 50% |
| 10 | Novy-Marx, R (2013) The other side of value: The gross profitability premium | 0.511 | 2 | 2 | 50% |
Showing the top 10 of 61 scored citations. 1 of these could not be matched to a bibliography entry, so only the citation key is shown.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.