Universität zu Köln

Demetrescu, Matei and Wied, Dominik (2019). Testing for constant correlation of filtered series under structural change. Econom. J., 22 (1). S. 10 - 47. OXFORD: OXFORD UNIV PRESS. ISSN 1368-423X

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Abstract

The paper proposes a test for constant correlations that allow for breaks at unknown times in the marginal means and variances. Theoretically and in an application to US and German stock returns, we find that not accounting for changes in the marginal moments has severe consequences. This is because incorrect standardization of the series transfers to the sample correlations onto which the tests are built. Correcting for variance breaks at unknown time will have an asymptotic effect. To discuss adjustments, we tackle the issue more generally by considering partial-sums-based inference on moment properties of unobserved processes that is conducted on the basis of estimated counterparts obtained in a preliminary step. The paper gives a characterization of the conditions under which the effect of filtering does not vanish asymptotically. The analysis extends to models with breaks in parameters at estimated time.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Demetrescu, Matei UNSPECIFIED UNSPECIFIED UNSPECIFIED Wied, Dominik UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-160773
DOI:	10.1111/ectj.12116
Journal or Publication Title:	Econom. J.
Volume:	22
Number:	1
Page Range:	S. 10 - 47
Date:	2019
Publisher:	OXFORD UNIV PRESS
Place of Publication:	OXFORD
ISSN:	1368-423X
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language GENERALIZED-METHOD; BREAK DETECTION; REGRESSION; HETEROSKEDASTICITY; INFERENCE; PARAMETER; NORMALITY; MODELS; COPULA Multiple languages Economics; Mathematics, Interdisciplinary Applications; Social Sciences, Mathematical Methods; Statistics & Probability Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/16077