An enhanced Gerber statistic for portfolio optimization.

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The purpose of this letter is to introduce a modified version of the Gerber statistic resulting in the enhancement of its function as a measure of statistical co-movement. The modification centres around the redefinition of zones and thresholds, alongside the use of finite real-valued contributions rather than discrete binary counts in assigning value to individual co-movements. Arguments for the former are based on the statistical alignment of data series for the purposes of more effectively delineating concordant and discordant co-movement. Arguments for the latter are based on attributing greater weight to better information. Collectively this approach simultaneously incorporates the merits of Gerber-like thresholds and zoning, and conventional correlation-like co-movement measurement.
Original languageEnglish
Article number103229
JournalFinance Research Letters
Early online date10 Aug 2022
Publication statusPublished (in print/issue) - 31 Oct 2022

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  • Estimation error
  • Gerber statistic
  • Portfolio optimization
  • Shrinkage
  • Equity co-movements
  • Modern portfolio theory


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