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IDSS Distinguished Seminar Series

James-Stein for eigenvectors: reducing the optimization bias in Markowitz portfolios

April 3, 2023 @ 4:00 pm - 5:00 pm

Lisa Goldberg (UC Berkeley)



We identify and reduce bias in the leading sample eigenvector of a high-dimensional covariance matrix of correlated variables. Our analysis illuminates how error in an estimated covariance matrix corrupts optimization. It may be applicable in finance, machine learning and genomics.


Lisa Goldberg is Head of Research at Aperio and Managing Director at BlackRock.  She is Professor of the Practice of Economics at University of California, Berkeley, where she co-directs the Center for Data Analysis in Risk, an industry partnership that supports research at the intersection of financial economics and data science. Lisa is a mathematician whose research has touched topology, dynamical systems, quantitative finance, sports analytics, personalized investing and high-dimensional statistics.  She is the co-author of Portfolio Risk Management,  published by Princeton University Press in 2010, and inventor on five patents. Lisa is on track to complete a swim around the equator, roughly 40,000km, in 2036.

MIT Institute for Data, Systems, and Society
Massachusetts Institute of Technology
77 Massachusetts Avenue
Cambridge, MA 02139-4307