Description Usage Arguments Details Value References Examples
View source: R/cov-estim-ewma.R
Computes the Exponentially Moving Average (EWMA) estimator of the covariance matrix.
1 | sigma_estim_ewma(data, lambda = 0.97)
|
data |
an nxp data matrix. |
lambda |
a double for the decay parameter λ. Default is 0.97 - the standard for monthly returns according to \insertCiteriskmetrics1996;textualCovEstim. If the data consists of daily returns, lambda should be set to 0.94. |
The EWMA estimator of the covariance matrix for an nxp data matrix X is computed with the following formula:
\hat{Σ}_{t}= (1-λ)R_{t}R'_{t} + λ\hat{Σ}_{t-1},
where R_{t} is the matrix of demeaned returns for the time period t and \hat{Σ}_{t-1} is the EWMA covariance estimator for the period t-1.
a list with the following entries
a pxp estimated covariance matrix.
an estimation specific tuning parameter, here the decay parameter λ.
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