AdvancedMultiple choice
You estimate a covariance matrix for 500 assets from 250 days of returns. What is wrong?
- ANothing – 250 observations is a perfectly adequate sample
- BIt is singular, and its smallest eigenvalues are pure noise
- CThe returns will not be normally distributed over that window
- DThe matrix will fail to be symmetric in finite samples
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Risk models: covariance estimation, VaR and expected shortfall
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