Cleaning correlation matrices

1 April 2016

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From Risk Magazine's April 2016 issue "The determination of correlation matrices is typically affected by in-sample noise. Joël Bun, Jean-Philippe Bouchaud and Marc Potters propose a simple, yet optimal, estimator of the true underlying correlation matrix and show that this new cleaning recipe outperforms all existing estimators in terms of the out-of-sample risk of synthetic portfolios."

Authors

Joël Bun , Marc Potters , Jean-Philippe Bouchaud