Statistical Inference for the Expected Utility Portfolio in High Dimensions

Taras Bodnar, Solomiia Dmytriv, Yarema Okhrin, Nestor Parolya, Wolfgang Schmid

Research output: Contribution to journalArticleScientificpeer-review

10 Citations (Scopus)
35 Downloads (Pure)


In this paper, using the shrinkage-based approach for portfolio weights and modern results from random matrix theory we construct an effective procedure for testing the efficiency of the expected utility (EU) portfolio and discuss the asymptotic behavior of the proposed test statistic under the high-dimensional asymptotic regime, namely when the number of assets p increases at the same rate as the sample size n such that their ratio p/n approaches a positive constant cin (0,1) as nto infty. We provide an extensive simulation study where the power function and receiver operating characteristic curves of the test are analyzed. In the empirical study, the methodology is applied to the returns of S&P 500 constituents.

Original languageEnglish
Article number9258421
Pages (from-to)1-14
Number of pages14
JournalIEEE Transactions on Signal Processing
Publication statusPublished - 2021

Bibliographical note

Green Open Access added to TU Delft Institutional Repository ‘You share, we take care!’ – Taverne project
Otherwise as indicated in the copyright section: the publisher is the copyright holder of this work and the author uses the Dutch legislation to make this work public.


  • Finance
  • mean-variance optimal portfolio
  • portfolio analysis
  • random matrix theory
  • shrinkage estimator
  • statistical test


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