Empirical Bayes Estimation of Securities Price Parameters

  • Leonard C. Maclean
  • Michael E. Foster
  • William T. Ziemba
Part of the Applied Optimization book series (APOP, volume 70)


This paper considers the estimation of parameters in the price distribution of a vector of assets. Using a geometric Brownian motion model for price movements, where the model parameters have prior distributions, the form of the conditional distribution of future prices given the price history is developed. Using a truncation of the eigenstructure of the autocovariance matrix for securities prices, estimates of parameters in the conditional distribution are derived. The truncation estimator is a substantial improvement compared with traditional estimators such as the historic means and Bayes-Stein.


Supply Chain Conditional Distribution Truncation Estimator Portfolio Choice Constant Relative Risk Aversion 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer Science+Business Media Dordrecht 2002

Authors and Affiliations

  • Leonard C. Maclean
    • 1
  • Michael E. Foster
    • 2
  • William T. Ziemba
    • 3
  1. 1.Dalhousie University in HalifaxCanada
  2. 2.Saint Mary’s UniversityHalifaxCanada
  3. 3.University of British ColumbiaVancouverCanada

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