Optimal Portfolio Selection with Singular Covariance Matrix
Dimitrios Pappas, Konstantinos Kiriakopoulos, Athens Greece, George Kaimakamis · 2010
In this paper we use the Moore-Penrose inverse in the case of a close to singular and ill-conditioned, or singular variance-covariance matrix, in the classic Portfolio Selection Problem. In this way the possible singularity of the variance-covariance matrix is tackled in an efficient way so that the various application of the Problem to benefit from the numerical tractability of the Moore-Penrose inverse. Mathematics Subject Classification: 15A09, 91B02, 91B28