Authors: | Galeano, Pedro Wied, Dominik |
Title: | Monitoring correlation change in a sequence of random variables |
Language (ISO): | en |
Abstract: | We propose a monitoring procedure to test for the constancy of the correlation coefficient of a sequence of random variables. The idea of the method is that a historical sample is available and the goal is to monitor for changes in the correlation as new data become available. We introduce a detector which is based on the first hitting time of a CUSUM-type statistic over a suitably constructed threshold function. We derive the asymptotic distribution of the detector and show that the procedure detects a change with probability approaching unity as the length of the historical period increases. The method is illustrated by Monte Carlo experiments and the analysis of a real application with the log-returns of the Standard & Poor's 500 (S&P 500) and IBM stock assets. |
Subject Headings: | correlation changes Gaussian process online detection threshold function |
URI: | http://hdl.handle.net/2003/29399 http://dx.doi.org/10.17877/DE290R-3416 |
Issue Date: | 2012-03-29 |
Appears in Collections: | Sonderforschungsbereich (SFB) 823 |
Files in This Item:
File | Description | Size | Format | |
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DP_1212_SFB823_Wied_Galeano.pdf | DNB | 412.75 kB | Adobe PDF | View/Open |
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