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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/26523

Title: Improved Estimates of Correlation Coefficients And Their Impact on the Optimum Portfolios
Authors: Elton, Edwin J.
Gruber, Martin J.
Spitzer, Jonathan
Issue Date: Sep-2004
Series/Report no.: FIN-04-016
Abstract: To implement mean variance analysis one needs a technique for forecasting correlation coefficients. In this article we investigate the ability of several techniques to forecast correlation coefficients between securities. We find that separately forecasting the average level of pair-wise correlations and individual pair-wise differences from the average improves forecasting accuracy. Furthermore, forming homogenous groups of firms on the basis of industry membership or firm attributes (eg. Size) improves forecast accuracy.
URI: http://hdl.handle.net/2451/26523
Appears in Collections:Finance Working Papers

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