Reactive Global Minimum Variance Portfolios with k-BAHC covariance cleaning

Abstract

We introduce a k-fold boosted version of our Boostrapped Average Hierarchical Clustering cleaning procedure for correlation and covariance matrices. We then apply this method to global minimum variance portfolios for various values of k and compare their performance with other state-of-the-art methods. Generally, we find that our method yields better Sharpe ratios after transaction costs than competing filtering methods, despite requiring a larger turnover.

Tasks

Reproductions