(), Taras Bodnar
(), Stepan Mazur
() and Yarema Okhrin
David Bauder: Humboldt-University of Berlin, Postal: Humboldt-University of Berlin, Department of Mathematics, D-10099 Berlin, Germany
Taras Bodnar: Stockholm University, Postal: Stockholm University, Department of Mathematics, SE - 10691 Stockholm, Sweden
Stepan Mazur: Örebro University School of Business, Postal: Örebro University, School of Business, SE - 701 82 ÖREBRO, Sweden
Yarema Okhrin: University of Augsburg, Postal: University of Augsburg, Department of Statistics, D-86159 Augsburg, Germany
Abstract: In this paper we consider the estimation of the weights of tangent portfolios from the Bayesian point of view assuming normal conditional distributions of the logarithmic returns. For di↵use and conjugate priors for the mean vector and the covariance matrix, we derive stochastic representations for the posterior distributions of the weights of tangent portfolio and their linear combinations. Separately we provide the mean and variance of the posterior distributions, which are of key importance for portfolio selection. The analytic results are evaluated within a simulation study, where the precision of coverage intervals is assessed.
23 pages, February 1, 2018
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