Directional Variance Adjustment: Bias Reduction in Covariance Matrices Based on Factor Analysis with an Application to Portfolio Optimization

• Daniel Bartz ,

  * E-mail: daniel.bartz@tu-berlin.de

  Affiliation Machine Learning Group, Computer Science Department, Technical University of Berlin, Berlin, Germany

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• Kerr Hatrick,

  Affiliation Barclays Capital, London, Great Britain

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• Christian W. Hesse,

  Affiliation Global Markets Equity, Deutsche Bank AG, London, Great Britain

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• Klaus-Robert Müller,

  Affiliations Machine Learning Group, Computer Science Dept., Technical University of Berlin, Berlin, Germany, Department of Brain and Cognitive Engineering, Korea University, Seoul, Korea

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• Steven Lemm

  Affiliation Data Intelligence Team, Zalando GmbH, Berlin, Germany

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