Added shrink_covariance_matrix.shrink_covariance_matrix()#15
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jasonstrimpel wants to merge 3 commits into
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Added shrink_covariance_matrix.shrink_covariance_matrix()#15jasonstrimpel wants to merge 3 commits into
jasonstrimpel wants to merge 3 commits into
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Shrinks towards constant correlation matrix
If shrink is specified then this const is used for shrinkage
The notation follows Ledoit and Wolf (2004)
http://www.ledoit.net/honey_abstract.htm
This version: 06/2009
Parameters
x : N x N sample covariance matrix of stock returns
shrink : given shrinkage intensity factor; if none, code calculates
Returns
tuple
: numpy.ndarray which contains the shrunk covariance matrix
: float shrinkage intensity factor