Resampling Procedure to Construct Estimation Error Efficient Portfolios for Stationary Returns of Assets

Abstract

This paper discusses resampling procedures in the estimation of optimal portfolios when the returns are VAR( p ) processes and VGARCH( p, q ) processes. Then a consistency between the estimation error of the estimator of the mean-variance optimal portfolio parameter and that of the resampled one is shown. Based on this we construct an estimator of the lower tail of the estimation error. Moreover, we introduce the Estimation Error Efficient Portfolio which considers the estimation error as the portfolio risk. Numerical results show that our approach is applicable to actual portfolio management.