Abstract:In this paper, using the shrinkage-based approach for portfolio weights and modern results from random matrix theory we construct an effective procedure for testing the efficiency of the expected utility (EU) portfolio and discuss the asymptotic behavior of the proposed test statistic under the high-dimensional asymptotic regime, namely when the number of assets p increases at the same rate as the sample size n such that their ratio p/n approaches a positive constant c ∈ (0, 1) as n → ∞ . We provide an extensi… Show more
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