Lisa from Cuccicuccicoo shows how she refashioned a knit scarf into a shrug for her daughter. She gave it a lining to keep the edges from curling and to add extra warmth. For a lighter weight shrug, you could also just use a length of knit fabric. Like her scarf shrug, lining it with another piece of knit would keep the edges from curling. Go to Cuccicuccicoo for the tutorial.
[photo from Cuccicuccicoo]