Authors: Arnold, Matthias
Weißbach, Rafael
Title: Testing large dimensional correlation
Language (ISO): en
Abstract: This paper introduces a test for zero correlation in situations where the correlation matrix is large compared to the sample size. The test statistic is the sum of the squared correlation coe±cients in the sample. We derive its limiting null distribution as the number of variables as well as the sample size converge to infinity. A Monte Carlo simulation finds both size and power for finite samples to be suitable. We apply the test to the vector of default rates, a risk factor in portfolio credit risk, in different sectors of the German economy.
Subject Headings: N-p- asymptotics
Portfolio credit risk
Testing correlation
Issue Date: 2007-05-25T12:23:32Z
Appears in Collections:Sonderforschungsbereich (SFB) 475

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