Deconstructing the Gerber statistic

Article Business, Finance

The Gerber Statistic: A Robust Co-Movement Measure for Portfolio Optimization

Sander Gerber et al.

Summary: This article introduces the Gerber statistic, a robust co-movement measure for covariance matrix estimation in portfolio construction. The Gerber statistic outperforms other commonly used methods, such as historical covariance and shrinkage, in terms of returns for investment scenarios.

JOURNAL OF PORTFOLIO MANAGEMENT (2022)

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Article Business, Finance

An enhanced Gerber statistic for portfolio optimization

William Smyth et al.

Summary: This article introduces a modified version of the Gerber statistic that enhances its function as a measure of statistical co-movement by redefining zones and thresholds, and using finite real-valued contributions. This approach combines the merits of Gerber-like thresholds and zoning, and conventional correlation-like co-movement measurement.

FINANCE RESEARCH LETTERS (2022)

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Article Business, Finance

A practical guide to robust portfolio optimization

C. Yin et al.

Summary: Robust optimization addresses the sensitivity issues of portfolio mean-variance optimization by taking into account the uncertainty in expected returns. Practical guidance is provided on the choice of uncertainty in form and level, with a preference for quadratic uncertainty set over box uncertainty and a diagonal uncertainty matrix with only variances. The uncertainty level can be chosen based on asset Sharpe ratios, and practical examples show that robust optimization can overcome the weaknesses of mean-variance optimization in real investment problems.

QUANTITATIVE FINANCE (2021)

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Article Multidisciplinary Sciences

A Time-Varying Gerber Statistic: Application of a Novel Correlation Metric to Commodity Price Co-Movements

Bernardina Algieri et al.

Summary: This study investigates the daily co-movements in commodity prices over the period 2006-2020 using a novel approach based on a time-varying Gerber correlation. The results indicate that there are several co-movements across commodities, that these co-movements change over time, and that they are tendentially positive. Different forecasting models show varying accuracies for different types of commodities, with proposed models being superior to the benchmark method.

FORECASTING (2021)

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Article Business, Finance

Enhanced Portfolio Optimization

Lasse Heje Pedersen et al.

Summary: The study focused on addressing issues in portfolio optimization and introduced a simple enhanced method. Applying this method to industry and timeseries momentum resulted in significant alpha beyond market and standard factors.

FINANCIAL ANALYSTS JOURNAL (2021)

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Article Business, Finance